Transfer in to a Defined Benefit scheme 25 years ago

Fylde1

When I joined my current employer, I was permitted to transfer-in my personal pension into their BD scheme. The amount was £7500. This payment has never been mentioned on my Annual benefits statement, and after writing to the scheme’s administrators recently,  I received an apologetic reply, assuring me that it would appear on the next statement, which is due in April. My question is...Exactly what would have happened to this money? The member’s handbook simply says that the Trustees may allow transfers-in, but does not elaborate. The letter I have from the Trustees back in 1995 simply states that the figure of £7500 has “been added to my existing benefits”. I have asked the Administrators to clarify the situation, but before they do, I wonder if anyone can give me an indication of what the situation might be.
many thanks

xylophone

You should be told how much  pension your transfer in bought you in the DB Scheme.

Silvertabby

xylophone said:

You should be told how much  pension your transfer in bought you in the DB Scheme.

Likely to be shown as extra service.  Does your benefit statement show your actual date of joining, or an earlier date?  Note that the extra service won't necessarily be the same amount of time you paid into your personal pension.

Fylde1

Well this is where I am somewhat confused. The original letter, which was written to me before the transfer says this: (and I’m copying it exactly as it is written) and it was based on an original transfer-in of £6927.47. When it was completed, it has risen to the £7590.

”a) If you decide to transfer your benefits into the Pension plan, you would be provided with a pension at your normal retirement date (13/08/2028) of £2226.06
Of this pension £2226.06 will increase in line with inflation between the date of transfer and 13/08/2028 (subject to a maximum increase in any year of 5%). For illustration only, I have calculated that if the increase were 5% each year, your total pension at normal retirement date would amount to £11136.98 per annum.
b) In the event of your death after retirement, there would be payable a widow’s pension of £5568.49.
c) If you should die before retirement, a lump sum of £6900 being your own contributions transferred from your ex-employer’s scheme would be payable to your dependants.”

I’m coming up for 57 and intend to retire within two years. The above doesn’t make sense to me!

Fylde1

The benefit statement shows three different dates, the date joined company 08/93, joined pension plan, 06/96 and date pensionable service commenced 04/95

hyubh

Fylde1 said:

Well this is where I am somewhat confused. The original letter, which was written to me before the transfer says this: (and I’m copying it exactly as it is written) and it was based on an original transfer-in of £6927.47. When it was completed, it has risen to the £7590.

”a) If you decide to transfer your benefits into the Pension plan, you would be provided with a pension at your normal retirement date (13/08/2028) of £2226.06
Of this pension £2226.06 will increase in line with inflation between the date of transfer and 13/08/2028 (subject to a maximum increase in any year of 5%). For illustration only, I have calculated that if the increase were 5% each year, your total pension at normal retirement date would amount to £11136.98 per annum.
b) In the event of your death after retirement, there would be payable a widow’s pension of £5568.49.
c) If you should die before retirement, a lump sum of £6900 being your own contributions transferred from your ex-employer’s scheme would be payable to your dependants.”

I’m coming up for 57 and intend to retire within two years. The above doesn’t make sense to me!

This is a transfer done as a so-called 'PUP' ('paid-up pension') rather buying added years service. (Presumably it's a private sector DB scheme? Although, transfers into modern public sector schemes, funnily enough, are now a bit like this.) So, rather than earning a service credit to go against your final pensionable salary, the extra pension in the scheme was calculated up front, and (per the terms quoted) index linked to inflation (with a 5% cap) up to NRD (the choice of index linking, even having any at all, would have been just down to scheme rules).

On your pension statements, I would expect it to be separately listed, since the amount will have to be separately recorded on the administrator's computer system in the first place. Chances are it got 'lost' at some point (maybe when the scheme administrator changed, or just when the same administrator changed software systems), which is why it didn't appear on your annual statements, but the amount has now been 'found' when the current administrator looked through paper files or images.

With respect to your original question - 'Exactly what would have happened to this money?' - well, the same as regular scheme contributions, into the scheme's investment fund. Being DB, it really doesn't matter - you exchanged the old pension for additional benefits in the scheme, guaranteed by the sponsoring employer.

cloud_dog

Just as an anecdotal comment, when I did this with my previous DB scheme (1997) my DB statements used to list the transferred pension amount at age 65 separately to the accruing benefit (at age 65).  At some point in 2003 or 2004, i.e. on my 2004 statement a change was made to my annual statement and the separate amount was included within my ongoing DB pension for age 65.

May this have happened to your statements? 

Fylde1

Thank you very much, that is most helpful, and much appreciated. Yes, it is a private sector scheme. The only thing I am unclear about is why there are two pension figures given. I can’t imagine that my transfer-in would produce a pension of £11000 a year, so what is the relevance to me of that particular figure?

Fylde1

cloud_dog said:

Just as an anecdotal comment, when I did this with my previous DB scheme (1997) my DB statements used to list the transferred pension amount at age 65 separately to the accruing benefit (at age 65).  At some point in 2003 or 2004, i.e. on my 2004 statement a change was made to my annual statement and the separate amount was included within my ongoing DB pension for age 65.

May this have happened to your statements? 

Thanks Cloud dog,
no, my statements have never made mention of it at all. Fortunately I have retained all the previous correspondence, otherwise it may have been lost in the ether!

[Deleted User]

Fylde1 said:

The benefit statement shows three different dates, the date joined company 08/93, joined pension plan, 06/96 and date pensionable service commenced 04/95

You joined company in 1993. You joined the pension scheme in 1996. Your pensionable service commencement date is 1995 ( before you joined scheme). This suggests you have been credited with extra service for your transfer.

xylophone

I can’t imagine that my transfer-in would produce a pension of £11000 a year, so what is the relevance to me of that particular figure?

Which inflation index is  actually used? http://www.swanlowpark.co.uk/consumer-price-index.php?&showRPI
Notice that your letter uses the maximum 5% in the illustration - it also indicates a calculation up to 2028.  £2226 @ 5% for 33 years
  https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php