Midland / HSBC "clawback"

fwor

Firstly I should start by apologising for using "clawback" in the title, because it's an emotive term and it doesn't (IMO) accurately describe the subject. But it's a term that people who understand the subject are likely to recognise.

https://www.bbc.co.uk/news/business-47894220

A relative of mine (female, employed by Midland in a relatively low-paid job from 1976 - early 80s) is going to be affected by this in a few years time. It means that - in effect - she won't get her state pension, because HSBC will deduct her pension from what they pay her as part of the Midland scheme.

The question is: does anyone know if there is any likelihood of this provision getting removed?

Personally I think the chances are as close to zero as makes no difference, because the provision was (I believe) clearly laid out to those that signed up to the (non-contributory) scheme, but it would help her with her longer-term financial planning to know what's likely to happen.

[And please, a debate on whether it's "clawback" or "abatement" isn't going to help - either way, it means less money than she had previously planned for!]

AnotherJoe

I think thats by no means the only pension scheme which has earlier retirement than state age and then deducts something when SP comes into play.
Why would it help your relative with long term financial planning? Surely she should always have been planning on this basis ?

I find it worrying for customers that someone who worked in a bank for umpteen years wasn't aware of such a basic element of their own pension scheme. What else might they have got wrong with customers accounts?

Paul_Herring

Ms McGeough-Adams is one of 52,000 members of the pension scheme - technically the 1974 Midland Bank defined benefit pension scheme - whose company pensions will be reduced when they reach state retirement age.

A campaign group she helped form has requisitioned a vote at the annual general meeting (AGM) which calls for the bank to "abolish, or effectively remedy, the unfair discriminatory practice".

Is this the concept where a scheme pays slightly more before SPA than they otherwise would, with an expectation of reducing the company pension by the SP after SPA ,so the total pension (state and private) remains largely the same before and after, but allows more to be paid earlier?

The alternative being, being paid less throughout the whole of retirement from the start of retirement.

westv

AnotherJoe wrote: »

I think thats by no means the only pension scheme which has earlier retirement than state age and then deducts something when SP comes into play.
Why would it help your relative with long term financial planning? Surely she should always have been planning on this basis ?

I find it worrying for customers that someone who worked in a bank for umpteen years wasn't aware of such a basic element of their own pension scheme. What else might they have got wrong with customers accounts?

That's something that I didn't think was that clear in the BBC article when I read it the other day. If the pension reduction was in the terms of the scheme (and not hidden in small print) then everybody would/should have known about it.

hyubh

fwor wrote: »

A relative of mine (female, employed by Midland in a relatively low-paid job from 1976 - early 80s) is going to be affected by this in a few years time. It means that - in effect - she won't get her state pension, because HSBC will deduct her pension from what they pay her as part of the Midland scheme.

Well, from a scheme design point of view, it's just front-loading pension benefits somewhat before SPA. If there never was the state deduction rule in the first place, then maybe the accrual rate would have been a bit less, eligibility rules tightened, etc.

You might say it disproportionately affects someone who is female and was employed in a relatively low-paid job. However, final salary schemes in their 80s 'heyday' were not egalitarian things in the first place (e.g. eligibility for manual workers was typically restricted, requirements for x years service before being able to join that hit women in particular were common, inflation protection for early leavers was poor, execs/senior management typically had their own schemes or sections with much more generous terms than ordinary staff, etc.).

The question is: does anyone know if there is any likelihood of this provision getting removed?

Personally I think the chances are as close to zero as makes no difference, because the provision was (I believe) clearly laid out to those that signed up to the (non-contributory) scheme

We're all just guessing really, but I would strongly doubt any legislation being put in place that retrospectively alters the scheme design. However, activist pressure might lead to the bank doing it themselves.

PS - the fact your relative is only having the reduction from her actual state pension age, rather than what her SPA would have been in the early 80s, suggest things aren't actually as bad as they might have been? Some schemes might still do it from 60 for a woman, since that's the age hardcoded in their rules, and when the reduction would have been designed to come in originally.

fwor

AnotherJoe wrote: »

Why would it help your relative with long term financial planning? Surely she should always have been planning on this basis ?

Oh, Ok - perhaps I should have said what I thought was obvious - that up until a short while ago she was completely unaware of the provision. Obviously, she would not have been planning for it if she was not aware of it.

AnotherJoe wrote: »

I find it worrying for customers that someone who worked in a bank for umpteen years wasn't aware of such a basic element of their own pension scheme. What else might they have got wrong with customers accounts?

It's not really that surprising, IMO. She joined the bank at 18, straight from school. At that age, I doubt many people would a) have understood the language or concepts used in a typical pension scheme and b) have had any illusions that they could do anything about it, other than decline a "free" pension (which of course was not really free).

fwor

hyubh wrote: »

PS - the fact your relative is only having the reduction from her actual state pension age, rather than what her SPA would have been in the early 80s, suggest things aren't actually as bad as they might have been? Some schemes might still do it from 60 for a woman, since that's the age hardcoded in their rules, and when the reduction would have been designed to come in originally.

It's certainly a relevant point. She did not take her pension early, so she took the HSBC/Midland pension from 60 - which is her SPA as it was defined during the whole of her time at the Midland.

So she hasn't had any pre-SPA (as defined in the scheme originally) payments that need to be "clawed back". But we don't actually know for sure that she hasn't already had the "abatement" applied, from age 60! [Edit - from reading the docs that xylophone points to below, that can't have happened, thankfully).

I've suggested that she contacts the pension scheme administrators to find out, which won't happen for a couple of weeks now as she's away on holiday.

xylophone

https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN01121

Personally I think the chances are as close to zero as makes no difference, because the provision was (I believe) clearly laid out to those that signed up to the (non-contributory) scheme, but it would help her with her longer-term financial planning to know what's likely to happen.

http://www.web40571.clarahost.co.uk/archive/saga/2000_and_before/990202.htm

You can tell if your scheme makes a deduction by reading carefully the booklet which sets out the rules of the scheme. If the booklet says your is an 'integrated scheme' or is 'integrated with the National Insurance scheme' then a deduction will be made and details of how the deduction is worked out should be there. If you want to get an actual figure for how much the deduction is - or will be - in your case, then the person responsible for the scheme should tell you. Like all such enquiries it is better made in writing to avoid misunderstandings.


Has your relative obtained a new state pension statement?

https://www.gov.uk/check-state-pension

If not, you might point out the above to her.

If she is eligible for a state pension then she will get a state pension.

Is it not a proportion of the state pension that is deducted from the Scheme Pension rather than the whole state pension?

Is the case that your relative has not yet reached age 60 and is not yet drawing the pension from HSBC?

Does she have a statement of deferred benefits from when she left the bank?

Once in payment, the Scheme has no obligation to inflation link pre 88 GMP.

https://futurefocus.staff.hsbc.co.uk/-/media/project/futurefocus/information-centre/pensioner/other-information/hsbc-pension-increase-2019.pdf

xylophone

PS - the fact your relative is only having the reduction from her actual state pension age, rather than what her SPA would have been in the early 80s, suggest things aren't actually as bad as they might have been? Some schemes might still do it from 60 for a woman, since that's the age hardcoded in their rules, and when the reduction would have been designed to come in originally.

It does appear that HSBC apply it at SPA.....but sometimes they forgot....

https://inews.co.uk/inews-lifestyle/money/hsbc-pension-scheme-bank-demands-thousands-ex-employees/

fwor

Thanks - there's a lot of info there for her to look at!

Yes, she started taking the pension when she reached 60 last year. And I believe she has checked her new state pension entitlement, and she has enough years to qualify in full.

She needs to check on the amount of the deduction, because it looks as though, as you say, it may only reduce partially when reaching SPA, rather than eliminating the whole of the State Pension - as already said, there seems to be a fair bit of emotive language being used, and it may be that the impact is less than some might suggest.

She has lost all of the documentation from that employment (yes, I know more care should be taken, but if you move house a few times that can easily happen) so I guess the only course of action is to contact the scheme administrators and see what they have to say.

DT2001

I have a deferred Barclays pension which is subject to SPD (as they call it, State Pension D!duction). An explanation on an annual pension review letter states “The maximum SPD is 50% of the single persons Basic State Pension in force when you left the Scheme...... The maximum in any individual case is 12.5% of total gross of total gross pension entitlement before any reduction for early payment. The amount of deduction is fixed and does not increase over your retirement.”
I hope Midland’s scheme will have been similar so the effect will less than you feared. Ask the administrators for the figure or how it is calculated.
My adjustment is 11% of original value. I assume it will come out of my non GMP element and so reduce that part of my pension that gets RPI increases.