SKF (GSK) pension forecast and CETV value confusion

Parking_Trouble

I have a deferred DB pension with Smith Kline and French, now Glaxo Smith Kline. Left late April in 1987 after 5 years service.
I have had conflicting and unclear figures since I started asking in the past 2-3 years.
Administration recently moved from Equniti to WTW. 
The only consistent number from day 1 is:

Pre 6/4/1988 Guaranteed Minimum Pension (GMP)                                  £314.60

Excess over GMP                                                                                       £536.38

TOTAL £850.98
I asked for a pension forecast and CETV because my website record tells me nothing. No online quotations, because it's too complicated
Equiniti gave me an estimated pension on retirement at 65 of £2,935 - using 1.9% pa CPI from 2018 to NRD in 2023
Last CETV figure in 2018 was £51k, less than 50% of the value in 2017.
WTW now offering £153k
Equiniti in 2018 said:

• Revaluation Before Retirement 
  The law and the Plan Rules require your deferred pension to be revalued between your date of leaving and your Normal Retirement Date in the following ways (please note these are the minimum requirements and the Plan Trustees may choose to award discretionary increase over and above the minimum at any time):

  • Your Guaranteed Minimum Pension (GMP) must revalue in line with National Average Earnings, subject to a maximum of 5% per annum (compound) for each complete tax year between your date of leaving and your GMP age, then by 1/7th of 1% for each week between your 65th birthday and your actual retirement date.

  ·         Your Excess pension earned since 1 January 1985 must revalue in line with the increase in the Retail Prices Index (RPI) between your date of leaving and 31 December 2010.
  ·         Your Excess pension earned since 1 January 1985 must then revalue in line with the increase in the Consumer Prices Index (CPI) between 1 January 2011 and your Normal Retirement Date.

WTW now say (27th July):

Increases to the deferred pension before the benefit is paid
· The total Guaranteed Minimum Pension (GMP) will increase by 8.5% for each complete tax year between the date you leave the Plan and the date your GMP will begin to be paid.
· The Plan pension (over the GMP) built up before 1 January 1985 will not increase*.
· The Plan pension (over the GMP) built up after 31 December 1984 is increased by price inflation up to 5% for each year between the date of leaving the Plan and NRD. *Discretionary revaluation The company currently funds a discretionary increase to elements of a member’s deferred pension that would not receive an inflation increase as of right. The increase is reviewed on an annual basis. The increase is currently based on CPI up to 5% a year. 

The £153k is very, very tempting - I was working with the last (disappointing) Equiniti quote of £50k. However, I do need to know how much the DB pension is going to be and if I can trust WTW to get this right. I am already drawing a good DB pension (administered by WTW) and get state pension in 2024 which will be a bonus.

The difference between £314.60  @ 5% compound and 8.5% compound is huge!  £1800 v £5900 !!!

Who do I trust?

How do corroborate the numbers without having to wait until the final number in 3 years time?

xylophone

This is quite interesting.
With regard to the revaluation of the GMP in deferment, schemes had a choice - Full Rate, Fixed Rate, or  (formerly) Limited Rate.

See  https://www.gov.uk/guidance/how-to-calculate-your-scheme-members-guaranteed-minimum-pension#:~:text=Limited%20rate%20revaluation%20is%205,made%20with%20section%20148%20revaluation.

and 
 https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/#:~:text=The%20revaluation%20period%20for%20GMPs,Aprils%20between%20the%20two%20dates.

You do need to check which version is correct.

You should be aware that once in payment, the scheme has no obligation to pay any index linking on your pre 88 GMP.

The excess would be indexed according  to the scheme rules.
https://www.gskpensions.co.uk/member-questions/

Be aware that to move your DB pension to a DC scheme would require the advice of a Pension Transfer Specialist.
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/
Have you obtained a State Pension Forecast?
https://www.gov.uk/check-state-pension

Brynsam

Parking_Trouble said:

I have a deferred DB pension with Smith Kline and French, now Glaxo Smith Kline. Left late April in 1987 after 5 years service.
I have had conflicting and unclear figures since I started asking in the past 2-3 years.
Administration recently moved from Equniti to WTW. 
The only consistent number from day 1 is:

Pre 6/4/1988 Guaranteed Minimum Pension (GMP)                                  £314.60

Excess over GMP                                                                                       £536.38

TOTAL £850.98
I asked for a pension forecast and CETV because my website record tells me nothing. No online quotations, because it's too complicated
Equiniti gave me an estimated pension on retirement at 65 of £2,935 - using 1.9% pa CPI from 2018 to NRD in 2023
Last CETV figure in 2018 was £51k, less than 50% of the value in 2017.
WTW now offering £153k
Equiniti in 2018 said:

• Revaluation Before Retirement 
  The law and the Plan Rules require your deferred pension to be revalued between your date of leaving and your Normal Retirement Date in the following ways (please note these are the minimum requirements and the Plan Trustees may choose to award discretionary increase over and above the minimum at any time):

  • Your Guaranteed Minimum Pension (GMP) must revalue in line with National Average Earnings, subject to a maximum of 5% per annum (compound) for each complete tax year between your date of leaving and your GMP age, then by 1/7th of 1% for each week between your 65th birthday and your actual retirement date.

  ·         Your Excess pension earned since 1 January 1985 must revalue in line with the increase in the Retail Prices Index (RPI) between your date of leaving and 31 December 2010.
  ·         Your Excess pension earned since 1 January 1985 must then revalue in line with the increase in the Consumer Prices Index (CPI) between 1 January 2011 and your Normal Retirement Date.

WTW now say (27th July):

Increases to the deferred pension before the benefit is paid
· The total Guaranteed Minimum Pension (GMP) will increase by 8.5% for each complete tax year between the date you leave the Plan and the date your GMP will begin to be paid.
· The Plan pension (over the GMP) built up before 1 January 1985 will not increase*.
· The Plan pension (over the GMP) built up after 31 December 1984 is increased by price inflation up to 5% for each year between the date of leaving the Plan and NRD. *Discretionary revaluation The company currently funds a discretionary increase to elements of a member’s deferred pension that would not receive an inflation increase as of right. The increase is reviewed on an annual basis. The increase is currently based on CPI up to 5% a year. 

The £153k is very, very tempting - I was working with the last (disappointing) Equiniti quote of £50k. However, I do need to know how much the DB pension is going to be and if I can trust WTW to get this right. I am already drawing a good DB pension (administered by WTW) and get state pension in 2024 which will be a bonus.

The difference between £314.60  @ 5% compound and 8.5% compound is huge!  £1800 v £5900 !!!

Who do I trust?

How do corroborate the numbers without having to wait until the final number in 3 years time?

Have you gone back to WTW with the two sets of figures and asked them to confirm why the difference?

Parking_Trouble

Thanks Xylophone. Got experience of a transfer my wife did. State pension is fully paid up to date. Not sure if I will need to top up between next year and 2024 as I won't be paying NI anymore.

Before I go back Brynsam I want to have a better idea of what I should be entitled to. The £153k offer is valid until 27th October

Since I left in 1987 I only have one piece of correspondence dated May 2000 from 'Paymaster'. Can't remember how that came about. I think I tracked the pension down. Bear in mind that SKF merged with Beechams then Glaxo since I left. I have no audit trail of scheme changes.

The 2000 statement is post Beachams merger. This document says I'm a Beechams employee which is incorrect.
It clearly states - GMP is revalued at 8.5% pa
It also says SKF employees leavers prior to 1990 have a guaranteed revaluation rate on 5% on non-GMP. However in another section it says leavers between 1986 - 1990 'Only excess pension accrued after 1st Jan 1985 is revalued at 5%' - no mentioned of pre 1985. 

I had a tussle with Equiniti over the method of calculation. They just said it was changed since I left. I reluctantly took their word as I don't have an audit trail of scheme changes.

Now WTW appear to be using a calculation much closer to the 2000 statement. I obviously want WTW to be right!

xylophone

State pension is fully paid up to date. Not sure if I will need to top up between next year and 2024 as I won't be paying NI anymore.

What exactly does the forecast say?

xylophone

https://www.gracesguide.co.uk/Smith_Kline_and_French_Laboratories
It would seem that you started working for the company just before it became Smith  Kline Beckman
in 1982 and left before it became Smith Kline Beecham in 1989.

SKB merged with Glaxo Wellcome in 2000 to become Glaxo Smith Kline.
Have you looked at https://www.gskpensions.co.uk/member-questions/?

If you have a question or would like details about your pension benefits, please contact the administrator for your GSK pension plan. You can find the right details for your plan on our Contacts page.

If you have a concern relating to your pension benefits or the service you have received from the plan administrator, you should raise your concern with the administrator of your GSK pension plan in the first instance.

If you do not receive a satisfactory resolution to your concern from the plan administrator, the Pensions Advisory Service (TPAS) is available to assist members and beneficiaries in connection with difficulties which may arise, as well as answering general queries. Their services are free to use and the contact details are:

The Pensions Advisory Service
11 Belgrave Road
London, SW1V 1RB

0800 011 3797

Your first step is as above - you need to raise your query with WTW.

Parking_Trouble

xylophone said:

State pension is fully paid up to date. Not sure if I will need to top up between next year and 2024 as I won't be paying NI anymore.

What exactly does the forecast say?

Estimate based on your National Insurance record up to 5 April 2020 - £154.30
Forecast £174.32 if I contribute up to 6th April 2024
Maximum I can get is £174.32

xylophone

Forecast £174.32 if I contribute up to 6th April 2024

Is the important part. 
At 6/4/16, two calculations were done
NI years/30 x £119.30 + (Additional State Pension - Deduction for Contracting Out)

(NI years/35 x £155.65) - Contracted Out Pension Equivalent. 

Your "starting amount" was the higher of the two. 

Your SA was less than a full new state pension and you had a number of years before you reached SPA  - you had the opportunity to improve your SA up to a full NSP by NI contributions/credits up to SPA.
If you are not paying/being credited with NI then you can make voluntary contributions.
https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

Marcon

Parking_Trouble said:

Thanks Xylophone. Got experience of a transfer my wife did. State pension is fully paid up to date. Not sure if I will need to top up between next year and 2024 as I won't be paying NI anymore.

Before I go back Brynsam I want to have a better idea of what I should be entitled to. The £153k offer is valid until 27th October

If you're thinking of transferring out, have you already instructed an IFA? If not, you need to do so pronto - and they can sort it out on your behalf as part of their enquiries. 27 October sounds a long way off, but the hurdles your IFA will have to clear before they can advise are many and varied and the less time left on the guarantee period, the less likely they are to accept the instruction, let alone be able to deliver on time.

Parking_Trouble

Thanks Xylophone and Marcon.
I have emailed WTW to point out the difference with the last Equiniti statement. I have asked them to confirm their method of calculation. I have sent them the statement from 2000 which seems to align with their figures. 
I have asked them for a forecast of the pension in payment, either amount accrued to date or a forecast with estimated inflation figures from now until 2024. I had already requested this along with the CETV as I don't see how you can make a decision without it.

Parking_Trouble

WTW have responded (in part) to confirm that GMP is calculated at 8.5% pa. That's welcome news. 

I can confirm that leavers of the Scheme who left between 6 April 1978 and 5 April 1988 have their GMP revalued by 8.5%. As you left the Scheme on 24 April 1987, your GMP is revalued by 8.5%.

No idea how much the Excess pension will be revalued to but the GMP alone is an unexpected bonus.
Only worked there 5 years.
Will chase WTW to get a proper forecast which should end up £3k more than Equiniti.