Is RPI Changes To DB Pension The Next Misselling Scandal

Thrugelmir

Black_Cat2 said:

Ty @Linton but I'm a little confused.  If his pension only increases by as little as £10 a year (or thereabouts) then doesn't it seem wise to look into transferring it when he's 55 to earn much better rates elsewhere.  I see some peeps get slated here for suggesting it... but is it not so crazy? 

What "better rates" are you referring too?  Investment returns aren't guaranteed rates.  Major caveats apply. 

Tealblue

lookafterpennies said:

I know the new pension reforms brought big changes and freedoms to peoples pension planning. Anyone lucky enough to have a final salary pension can after taking advice, decide if they are better to stick with the DB pension with its guaranteed inflation busting RPI increases or take the transfer value (pot) and decide how this money is invested to last thier retirement. However if the RPI is to be replaced with a less generous CPI or CPIH, could we see a raft of complaints or even misselling claims on the back of this or may the pension funds have to address this shortcoming due to the fact that all the literature they produce quotes the RPI as the rate of increase albeit capped at a certain percentage. I know this might sound like small amounts but compounded over a number of years would be a large amount of money which could mean a different decision would have been more appropriate. 

Hindsight is always a wonderful aid to planning. Nobody is culpable for failing to accurately predict this change.

One thing which certainly will happen very soon is that this have an impact (downwards) on transfer value quotes from DB schemes, to reflect the anticipated lower cost of providing pensions from 2030.

Black_Cat2

Middlestitch said:

Black_Cat2 said:

Ty @Linton but I'm a little confused.  

I think you're quite confused, which is never a surprise with pensions. Your husband isn't yet 55, so his pension isn't yet in payment. It is increasing each year while it is 'deferred' (ie before he takes his benefits from the scheme) in line with CPI, to a maximum of 5%. What measure is used to increase it once the pension is actually in payment - may not be CPI. The scheme booklet and/or benefit statement will tell you.

No sure why you say you would look at transferring once he's 55. That's the minimum age at which he can start to draw his pension - he can transfer at an earlier age (but remember it isn't likely to be in his interests to do so).

Thanks all for your comments to me.  Yes I am confused @Middlestitch lol but getting there with replies on here including yours ty.  He won't be transferring out (even if he can) when we discussed it so that is not a query anymore.  Unfortunately he would refer to the scheme booklet but he doesn't have it, probably lost over the years. He requested it from the Trustees earlier this year and the reply (eventually after 3 e-mails) was that he was a complicated case and any questions would need to be answered individually.  He queried a couple of things but the replies took so long to come back he gave up 🙄

Thanks for all your comments 🤗

arnoldy

jamesd said:

You can't mis-sell a DB pension and except in the public sector they aren't guaranteed to keep up with inflation because there's a cap on increases, most often 5%.

Dead right and most people over look that PRIVATE SECTOR FINAL SALARY pensions are NOT INFLATION PROOF. Indeed its common to have parts at 2.5% and 5% cap and any capped increase conditional on the financial health of the fund
All it would take (as predicted by an increasing number of commentators) is a dose of 5% inflation and your real final salary will wither. And the most dangerous thing about it? There is nothing you can do about it all. 
Its one of the factors you need to consider in remaining in DB or transferring out.

xylophone

He requested it from the Trustees earlier this year and the reply (eventually after 3 e-mails) was that he was a complicated case and any questions would need to be answered individually. 

This should not prevent their providing the scheme booklet on request.

Is your husband sure that a copy of the booklet cannot be obtained through an internet search?

When did he leave the scheme?

When exactly was he working for this company?

Has he obtained a state pension forecast?

Have you?

german_keeper

xylophone said:

He requested it from the Trustees earlier this year and the reply (eventually after 3 e-mails) was that he was a complicated case and any questions would need to be answered individually. 

This should not prevent their providing the scheme booklet on request.

Is your husband sure that a copy of the booklet cannot be obtained through an internet search?

When did he leave the scheme?

When exactly was he working for this company?

Has he obtained a state pension forecast?

Have you?

Yes I did this a while back with my wife's deferred DB pension. She left the job mid 90s and the company has had several changes to it's pension scheme since. Not a booklet as such but all the relevant info about the old scheme was on their website. Very clear and very easy to find, I was quite impressed.  

Black_Cat2

Hi @xylophone - I'm sure he can't get the booklet anywhere else, they originally sent a booklet but it clearly had at the top that it related to schemes after 2008 (which was one of the e-mails I mention above) which he queried and received the reply his case is more complicated/complex etc.  He was 1989 to 1996.

There is no booklet going back before the 2008 one he was sent 🐈

Edited - on their website ^^^

Brynsam

Black_Cat2 said:

Hi @xylophone - I'm sure he can't get the booklet anywhere else, they originally sent a booklet but it clearly had at the top that it related to schemes after 2008 (which was one of the e-mails I mention above) which he queried and received the reply his case is more complicated/complex etc.  He was 1989 to 1996.

Not unreasonable that after a quarter of a century the booklet isn't readily available; his entitlement, particularly so long after leaving, is to certain information rather than 'a booklet' per se. Given his dates of membership, I'd agree that he is going to fall into the 'complicated cases' category. Administrators are up to their necks this year, dealing with many hundreds (and in some cases thousands) of extra queries. If he can't be bothered to pursue the answers because they aren't being supplied pronto, he has only himself to blame if he misses something important.

arnoldy said:

jamesd said:

You can't mis-sell a DB pension and except in the public sector they aren't guaranteed to keep up with inflation because there's a cap on increases, most often 5%.

Dead right and most people over look that PRIVATE SECTOR FINAL SALARY pensions are NOT INFLATION PROOF. Indeed its common to have parts at 2.5% and 5% cap and any capped increase conditional on the financial health of the fund

Not sure what point you are making. Statutory increases are statutory increases; the financial health of the fund isn't relevant. Discretionary increases are a different matter.

arnoldy said:

All it would take (as predicted by an increasing number of commentators) is a dose of 5% inflation and your real final salary will wither. And the most dangerous thing about it? There is nothing you can do about it all. 
Its one of the factors you need to consider in remaining in DB or transferring out.

Not too many people have a clue about their DB pension increases, so it follows that equally few think they are 'inflation proof'. A dose of 5% inflation would see many DB schemes having to pay much higher increases than they are paying in our present low-inflation climate.

xylophone

He was 1989 to 1996.

Does he have a statement of deferred benefits on leaving the scheme showing

his post 88 GMP and excess?

Does he know how his GMP revalues in deferment (full rate/fixed rate)?

https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/