Calculation method changed on db pension for early retirement

Tommyjw

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

hyubh said:

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

Not a question of saving money. More a question of the solvency of the scheme at the current time to meet it's projected future liabilities. Future funding being entirely dependent upon on the scheme sponsor . 

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-3-funding-defined-benefits-/#3b9aa4771dbb428f8bde6e829c3d3a6c

The scheme sponor is very solvent and has a repayment plan to fill the pension defecit over 10 years , reviewed every three years when a full valuation is done.

If the scheme sponsor was very solvent there'd be no need for a 10 year plan to address the deficit that already exists. High levels of inflation aren't going to make addressing the deficit any easy. 

The scheme is in defecit , but with a very solvent company who are required to provide a defecit reduction plan by the PPF I believe? They may be insolvent in 10 years!

Simply looking at the matter from a macro level and the scheme as a whole. Very different to your micro view where you want the biggest share of the available pie possible. 

I want what i signed up for when I joined the scheme 30 years ago and is promised according to the schemes rules.The same as other coleagues who have retired earlier than me . Nothing more , and as per my original quotation from the original administrators!

Stay to NRA and you will receive your full benefits. Nothing else is guaranteed as has been explained previously. 

Unless i'm issing something, reading through the thread, i actually think it is very much a possibility he is "guaranteed" what he is expecting.

It does not appear, based on what has been said, it is the factors themselves that have changed. If so, yes, the clip of the rules shown looks like they allow that to happen. 

However it instead appears the calculation methodology has been changed, which possibly contradict the Scheme rules. Revaluing benefits up to NRA before applying an early factor, or revaluing it up to the early retirement age and then applying it, are two very different things that (as far as my experience goes) are very clearly set out in the rules.

As Xylophone has mentioned, OP would need sight of the whole rules, in particular the NRD calculation section mentioned, to work it out. If it is a case it was always previously done wrong, then OP is out of luck, past members got lucky but OP is only entitled to what the rules say. If not, they've quoted him wrong and need to redo it.

If it is "ambiguous", then i would argue that past practice of doing it one way sets a precedent the Ombudsman would state the Trustee need to continue to follow and that the administrator on their behalf cannot suddenly decide to change it. In my experience i've come across numerous areas (not this exact one) where the only way a Scheme could decide what to do when rules were ambiguous was to take legal advice as to what they need to do, it would not be up to us or the Trustee to just randomly decide which way to lean.

toolateforsums

From the original scheme administrators when I asked for a quotation

'The estimated pension at 65 is £35,327.69 pa. At 55 you would get 60% of this, ie £21,196.61 pa. '

It is very clear above how the rules are applied . I was 53 at the time . The 4% pa reduction has not changed since my enquiry.

Changing scheme administrators should not allow for this change to happen surely?Not without changing the scheme rules?

My origiinal post mentioned about the fact i had reduce my contribution level for around 2 years and taken redundancy without looking for alternative positions with the company which i could have done. Hence my original questions.

sevenhills

Tommyjw said:

Unless i'm issing something, reading through the thread, i actually think it is very much a possibility he is "guaranteed" what he is expecting.

The OP does not want to tell us which company is funding this pension, so it's likely that the company will go bust.

Any product "guaranteed" by a bankrupt company will not uphold the details in the guarantee.

Dazed_and_C0nfused

This may be a red herring but as the op said this in the first post 

The quotation was received last year ,February 2021.the calculation states my pension as calculated will be my pension at 65 (NRA) and then discounted by 4% pa for early retirement. Pension quote was for a pension of 35k at 65 , reduced to 21k at 55. 

On the basis of the quotation , i stopped paying as much into my current dc scheme

Is it possible that the original quote assumed (for whatever reason) that benefits were continuing to accrue in the DB pension and would continue till age 65 and then when the new quote was generated this was based on the actual amount accrued to date in the deferred DB pension with the same 4%/year actuarial reduction applied to the current amount of deferred pension?

Pat38493

Wait - are you all saying that for the existing benefits in a DB pension scheme, the trustees can alter the discount amount per year for early retirement, and even can do that without informing all the prospective beneficiaries?

Surely the trustees must act in pensioners interest so this should only be possible if the fund is effectively insolvent?

I had always thought this is part of the scheme rules and could not be changed without some kind of consultation process?

hyubh

Pat38493 said:

Wait - are you all saying that for the existing benefits in a DB pension scheme, the trustees can alter the discount amount per year for early retirement, and even can do that without informing all the prospective beneficiaries?

Surely the trustees must act in pensioners interest so this should only be possible if the fund is effectively insolvent?

I had always thought this is part of the scheme rules and could not be changed without some kind of consultation process?

ERFs (and if applicable, LRFs) will be reviewed from time to time, that's perfectly normal (and will be in the rules). And acting in the interests of scheme members as a whole has no particular relation to being generous to early retirees specifically.

hyubh

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

hyubh said:

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

Not a question of saving money. More a question of the solvency of the scheme at the current time to meet it's projected future liabilities. Future funding being entirely dependent upon on the scheme sponsor . 

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-3-funding-defined-benefits-/#3b9aa4771dbb428f8bde6e829c3d3a6c

The scheme sponor is very solvent and has a repayment plan to fill the pension defecit over 10 years , reviewed every three years when a full valuation is done.

If the scheme sponsor was very solvent there'd be no need for a 10 year plan to address the deficit that already exists. 

That isn't true, the test for whether a recovery plan is needed or not is in relation to scheme assets vs. scheme liabilities, not the health of the sponsoring employer.

Chris_English

toolateforsums said:

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

hyubh said:

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

Not a question of saving money. More a question of the solvency of the scheme at the current time to meet it's projected future liabilities. Future funding being entirely dependent upon on the scheme sponsor . 

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-3-funding-defined-benefits-/#3b9aa4771dbb428f8bde6e829c3d3a6c

The scheme sponor is very solvent and has a repayment plan to fill the pension defecit over 10 years , reviewed every three years when a full valuation is done.

If the scheme sponsor was very solvent there'd be no need for a 10 year plan to address the deficit that already exists. High levels of inflation aren't going to make addressing the deficit any easy. 

The scheme is in defecit , but with a very solvent company who are required to provide a defecit reduction plan by the PPF I believe? They may be insolvent in 10 years!

Simply looking at the matter from a macro level and the scheme as a whole. Very different to your micro view where you want the biggest share of the available pie possible. 

I want what i signed up for when I joined the scheme 30 years ago and is promised according to the schemes rules.The same as other coleagues who have retired earlier than me . Nothing more , and as per my original quotation from the original administrators!

What were the terms regarding early retirement when you joined the scheme?

toolateforsums

sevenhills said:

Tommyjw said:

Unless i'm issing something, reading through the thread, i actually think it is very much a possibility he is "guaranteed" what he is expecting.

The OP does not want to tell us which company is funding this pension, so it's likely that the company will go bust.

Any product "guaranteed" by a bankrupt company will not uphold the details in the guarantee.

For confidentiality purposes I will not reveal the sponsoring company. However , there position is very strong. It is extremely unlikely they will 'go bust' anytime in the long term future(over 10 years away). Always a possibility though!

toolateforsums

Chris_English said:

toolateforsums said:

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

toolateforsums said:

Thrugelmir said:

hyubh said:

toolateforsums said:

From the trustee secretary: -

'On checking your file and reworking the calculations, done when XXXXXXXX were the administrator, it is clear that they based the Early retirement pensions on your estimated pension at Normal Retirement Date and then reduced it by the 4%.

 

YYYYYYYY, as the new administrators, have challenged this method and their administration and calculation system was set up under instruction from the Actuary to revalue only to the early retirement date. The rules of the scheme are not clear but do imply that that revaluation is to normal retirement date which is most unusual.'

 

Clearly a change in the calculation method and a significant one since changing scheme administrators.

It appears this trustee secretary has been taking tips from recent defenders of Boris Johnson. What the new administrator thinks would save money on implementing the scheme is neither here nor there, ditto whether the rules of the scheme are 'most unusual' or not. I'd ask the trustee to reconsider, and if they don't, raise a formal complaint (IDRP) about the (apparently acknowledged) recalculation contrary to established understanding of scheme rules...

Not a question of saving money. More a question of the solvency of the scheme at the current time to meet it's projected future liabilities. Future funding being entirely dependent upon on the scheme sponsor . 

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-3-funding-defined-benefits-/#3b9aa4771dbb428f8bde6e829c3d3a6c

The scheme sponor is very solvent and has a repayment plan to fill the pension defecit over 10 years , reviewed every three years when a full valuation is done.

If the scheme sponsor was very solvent there'd be no need for a 10 year plan to address the deficit that already exists. High levels of inflation aren't going to make addressing the deficit any easy. 

The scheme is in defecit , but with a very solvent company who are required to provide a defecit reduction plan by the PPF I believe? They may be insolvent in 10 years!

Simply looking at the matter from a macro level and the scheme as a whole. Very different to your micro view where you want the biggest share of the available pie possible. 

I want what i signed up for when I joined the scheme 30 years ago and is promised according to the schemes rules.The same as other coleagues who have retired earlier than me . Nothing more , and as per my original quotation from the original administrators!

What were the terms regarding early retirement when you joined the scheme?

The same calculation for working out your pension at NRD (accrued +RPI to 65), but you could retire at 60 with no penalty , or retire at a 3% reduction before then pa to the age of 50!. So only a 15% reduction for retiring at 55 from a calculated pension at the age of 65.