Defined Benefit Pension

Holls_dad

I received a valuation of £8950/year for my defined benefit pension in November 2020 and just asked for a quotation today and it is now £8790/ year I am only 48

is this possible that a DB yearly pension can drop, I thought it generally went up with inflation

It is a BT pension

Marcon

Are you using exactly the same proposed dates of retirement for both quotes?

Holls_dad

Marcon said:

Are you using exactly the same proposed dates of retirement for both quotes?

Yes the same date

Marcon

Could it be the projections are now being done on this basis: https://www.thisismoney.co.uk/money/pensions/article-8992811/82-000-BT-Pension-Scheme-members-34k-worse-off.html

If not, then I fear you might need to have a look at this thread (wet towel securely round head!), unless anyone else has a simpler suggestion: https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders

sandsy

The benefits you've accrued will roughly increase in line with inflation until you take them slightly different rules might apply as to how the inflation rate is determined for different parts of the pension, accrued at different times).

If you ask for a retirement quote for the age you intend to retire, the scheme have to estimate the future inflation as they don't know what it will be. If you ask again the following year, the inflation rate for the year just gone will now be known ( and will undoubtedly be different from estimated in the previous quote) and they might have changed their mind about future inflation levels. So the retirement quote will be different.

Holls_dad

sandsy said:

The benefits you've accrued will roughly increase in line with inflation until you take them slightly different rules might apply as to how the inflation rate is determined for different parts of the pension, accrued at different times).

If you ask for a retirement quote for the age you intend to retire, the scheme have to estimate the future inflation as they don't know what it will be. If you ask again the following year, the inflation rate for the year just gone will now be known ( and will undoubtedly be different from estimated in the previous quote) and they might have changed their mind about future inflation levels. So the retirement quote will be different.

The 2 quotes are called the current revalued annual pension at the two dates given November 2020 and January 2021

fly-catchers

Your wages/hours haven't changed?

Holls_dad

fly-catchers said:

Your wages/hours haven't changed?

No the defined benefits scheme ended in 2018 

Marcon

Marcon said:

Could it be the projections are now being done on this basis: https://www.thisismoney.co.uk/money/pensions/article-8992811/82-000-BT-Pension-Scheme-members-34k-worse-off.html

If not, then I fear you might need to have a look at this thread (wet towel securely round head!), unless anyone else has a simpler suggestion: https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders

Then it definitely sounds like one or indeed both of the above.

hyubh

Marcon said:

Could it be the projections are now being done on this basis: https://www.thisismoney.co.uk/money/pensions/article-8992811/82-000-BT-Pension-Scheme-members-34k-worse-off.html

A rather tendencious article I'd say due to the journalist misunderstanding what she was being told (perhaps partly because she has only ever been in a DC scheme personally...?). The BT pension guy is saying the scheme has RPI-linked assets, and that the loss from those being undermined is less than the gain from pension increases moving from to CPIH. Part of that will be because large swathes of the BT pensioner membership already have pension increases that are CPI not RPI due to mirroring public sector schemes and therefore have had CPI increases for nearly a decade now, i.e. the RPI linked assets are greater than the RPI linked liabilities...

zagfles

Marcon said:

Could it be the projections are now being done on this basis: https://www.thisismoney.co.uk/money/pensions/article-8992811/82-000-BT-Pension-Scheme-members-34k-worse-off.html

If not, then I fear you might need to have a look at this thread (wet towel securely round head!), unless anyone else has a simpler suggestion: https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders

Ignore the first link, it's nothing to do with the RPI changes that are coming in in 2030! Projections aren't done assuming a future rate of RPI or CPIH. The article is rubbish anyway, this was always going to happen, the chancellor delayed it further than the ONS wanted.

The second link to the MSE thread will explain it, the quote difference looks right.