Basic State Deduction and impact on DB scheme

Dazed_and_C0nfused

Our main gripe is she has been in the scheme for 44 years and 6 weeks before she is due to take it we only just discover this deduction.  

You mean she has been in the scheme for 44 years and 6 weeks and has never once thought to look at the scheme rules to see how her pension is calculated?

You should make this a priority as some schemes have a maximum accrual so it's not impossible that 44 years and 6 weeks service might only equate to say 40 years for pension purposes.

xylophone

You should make this a priority as some schemes have a maximum accrual so it's not impossible that 44 years and 6 weeks service might only equate to say 40 years for pension purposes.

 CU merged with GA forming CGU which merged with NU to form CGNU (renamed Aviva), the maximum accrual  in Aviva DB Scheme (now closed) appears to be 45 years.

It is not clear how far the Aviva Scheme mirrors schemes from merged companies.

https://microsite.ehr.com/avivastaffpensions/your-scheme/defined-benefits has a link to  a booklet

What the Company’s final

changes mean for your benefits

As a member of the final salary section you

choose to build up benefits at either 1/60th

or 1/80th of Final Pensionable Salary for

each complete month of Pensionable Service

subject to a maximum of 45 years.

If your service commenced on or after 31 July

1968 your final salary pension will be reduced

at state pension age by 1/80th of the Basic

State Pension for a single person at 31 March

2011 for each year of Pensionable Service

before 1 January 2000, plus an additional

proportion for each complete month,

increased up to retirement date in the same

proportion as your pension is increased. The

reduction will not exceed 10% of your pension

built up before 1 January 2000 or exceed one

half of the basic State pension payable to

a single person at the date when you leave

service.

xylophone

Our main gripe is she has been in the scheme for 44 years and 6 weeks before she is due to take it we only just discover this deduction.  We have also had about 5 IFA's look at it during the past 5 years when she was considering a transferring out of the scheme. All of their forecasts DIDN'T mention and reduction at state pension age.   

Perhaps they hadn't thought to obtain scheme guides to check scheme rules?

NoMore

Some say deduction, some might say enhancement up to state pension age

xylophone

 specifically penalises those will small pension pots.  J

See link in my first post above - HSBC has become notorious for the way that clawback is applied in its scheme (s).

Clawback has no link to salary.

On reaching SPA Clawback commences and is calculated thus:

The value of State Pension 52 weeks prior to leaving or retiring. Divide this sum by eighty and then

multiply by the number of completed pensionable years. This results in the highest paid losing a

small percentage of pension and the lowest paid losing the highest percentage.

For example, a senior manager retiring on a pension of £150,000 a year might suffer a clawback on

reaching SPA of £2,500 or just 1.7% whereas a junior clerk with the same job start and end dates

might retire on a pension of only £10,000 a year and yet also suffer clawback of £2,500 at SPA but

which equates to 25% of their pension.

This means the lowest paid are effectively subsidising the higher paid

Employment practices of the 1970s, 80s and 90s mean that the vast majority of the lowest paid are

women.

We have collated our own data base which irrefutably confirms that the Clawback method that HSBC

implement indirectly discriminates the lowest paid and who are mainly women. We have proven this

without the assistance of the bank.

Andy_L

xylophone said:

 specifically penalises those will small pension pots.  J

See link in my first post above - HSBC has become notorious for the way that clawback is applied in its scheme (s).

Clawback has no link to salary.

On reaching SPA Clawback commences and is calculated thus:

The value of State Pension 52 weeks prior to leaving or retiring. Divide this sum by eighty and then

multiply by the number of completed pensionable years. This results in the highest paid losing a

small percentage of pension and the lowest paid losing the highest percentage.

For example, a senior manager retiring on a pension of £150,000 a year might suffer a clawback on

reaching SPA of £2,500 or just 1.7% whereas a junior clerk with the same job start and end dates

might retire on a pension of only £10,000 a year and yet also suffer clawback of £2,500 at SPA but

which equates to 25% of their pension.

This means the lowest paid are effectively subsidising the higher paid

Employment practices of the 1970s, 80s and 90s mean that the vast majority of the lowest paid are

women.

We have collated our own data base which irrefutably confirms that the Clawback method that HSBC

implement indirectly discriminates the lowest paid and who are mainly women. We have proven this

without the assistance of the bank.

The (basic) state pension has very little link to how much you earn. The senior manager is going to get the same BSP as the Junior clerk so why should there be a difference in an abatement that is based on the state pension?

xylophone

The (basic) state pension has very little link to how much you earn. 

That is not the point.

The point is the percentage of occupational pension that the SPD represents.

Read the link again.

xylophone

And the row rumbles on.

https://www.pensions-expert.com/Law-Regulation/Unite-campaigners-plan-pensions-clawback-protest-at-HSBC-AGM

http://www.web40571.clarahost.co.uk/archive/saga/2000_and_before/990202.htm

segovia

Dazed_and_C0nfused said:

Our main gripe is she has been in the scheme for 44 years and 6 weeks before she is due to take it we only just discover this deduction.  

You mean she has been in the scheme for 44 years and 6 weeks and has never once thought to look at the scheme rules to see how her pension is calculated?

You should make this a priority as some schemes have a maximum accrual so it's not impossible that 44 years and 6 weeks service might only equate to say 40 years for pension purposes.

At aged 16 when she started like most youngsters retirement and pensions was a long way off and like most people you only start to pay attention as you near retirement age. It has been looked at by various IFA's over the years and she has received occasional statements from the administrator. However, there has been NO MENTION of and deductions up until now when she has decided to take it.   

Andy_L

xylophone said:

The (basic) state pension has very little link to how much you earn. 

That is not the point.

The point is the percentage of occupational pension that the SPD represents.

Read the link again.

It is mine. The BSP is a flat(ish) rate, regardless of salary so will be a different percentage of retirement income depending on  total pension provision. It will be a higher percentage of the lower paid and lower for the higher paid.

In a scheme with no clawback is it fair that the lower paid get a higher percentage of their occupational pension as state pension (despite lower NI contributions by the employer) than the higher paid?. Clearly that's a nonsense argument, so why is it not still nonsense if you reverse the argument? 

Dont forgot that FS DB schemes have always favoured the long service employees who climb the promotion ladder

ETA and what about bonuses/pay rises that are %age based vs a flat rate - they would have similar issues