Final salary pension

muswellblue

Hi, 

My final salary pension was frozen in 2015. I was told it’s not related to investments but related to the consumer price index and could rise to a maximum of 5% per year. 

I have been getting forecasts for when I’m 55 for the last three years and each year it has gone up. I just received this years forecast and it’s gone down. 

I’m a bit of a novice but thought it would always rise so was a bit surprised. I appreciate it may not rise as much each year due to inflation, but I didn’t think it could go down. 

Am I being a bit thick or have the pension provider made a mistake calculating my forecast?

appreciate any advice on this thanks. 

Brie

Are you talking about the annual amount you would get?  As far as I know that shouldn't be going down.   Or are you talking about some "fund value" associated with your pension should you wish to transfer it out?  Since a transfer out to anything other than a similar DB scheme is virtually impossible I would suggest that this is nothing to worry about.  

And I do know that pension administrators do make mistakes.  So probably best to ask them to clarify if you want to be sure.

El_Torro

Inflation is currently above 5%, so at least for now your pension is growing slower than inflation. Maybe this is the reason? I'm just guessing though. 

The best thing to do is to ask your pension administrator. 

muswellblue

Yes the amount I would get each year has gone down. I have contacted them to clarify this. 

Tommyjw

Usually i would guess in their projections they make assumptions for future years e.g assume inflation is 3% per year, so if the next year the inflation is less the future assumption will be less. But at the moment inflation is high and likely far exceeding any assumed inflation Schemes may use so I'd expect it to be higher.

I'd assume given you are going for 55 what's likely therefore to have changed are the Early Retirement reductions used for going prior to your Schemes normal retirement age (normally 65)

dunstonh

My final salary pension was frozen in 2015. I was told it’s not related to investments but related to the consumer price index and could rise to a maximum of 5% per year. 

When you say "frozen" do you actually mean frozen?    Its a very misused term by people.   Frozen has a very specific meaning but many use it incorrectly when referring to a pension they are no longer an active member of.

I have been getting forecasts for when I’m 55 for the last three years and each year it has gone up. I just received this years forecast and it’s gone down. 

Check the assumptions.  Its most likely that an assumption has changed.  However, it could be influenced if the plan is really frozen or not.

muswellblue

dunstonh said:

My final salary pension was frozen in 2015. I was told it’s not related to investments but related to the consumer price index and could rise to a maximum of 5% per year. 

When you say "frozen" do you actually mean frozen?    Its a very misused term by people.   Frozen has a very specific meaning but many use it incorrectly when referring to a pension they are no longer an active member of.

I have been getting forecasts for when I’m 55 for the last three years and each year it has gone up. I just received this years forecast and it’s gone down. 

Check the assumptions.  Its most likely that an assumption has changed.  However, it could be influenced if the plan is really frozen or not.

Ive always assumed it was frozen. My company stopped it like many other companies ending final salary pensions. We then started paying into a new pension. 

I will see if I can check the assumptions. 

Bimbly

muswellblue said:
Ive always assumed it was frozen. My company stopped it like many other companies ending final salary pensions. We then started paying into a new pension. 

I have a pension like that. It is described as "deferred". Yours is most likely deferred also, but you should check.

Pat38493

muswellblue said:

dunstonh said:

My final salary pension was frozen in 2015. I was told it’s not related to investments but related to the consumer price index and could rise to a maximum of 5% per year. 

When you say "frozen" do you actually mean frozen?    Its a very misused term by people.   Frozen has a very specific meaning but many use it incorrectly when referring to a pension they are no longer an active member of.

I have been getting forecasts for when I’m 55 for the last three years and each year it has gone up. I just received this years forecast and it’s gone down. 

Check the assumptions.  Its most likely that an assumption has changed.  However, it could be influenced if the plan is really frozen or not.

Ive always assumed it was frozen. My company stopped it like many other companies ending final salary pensions. We then started paying into a new pension. 

I will see if I can check the assumptions. 

Does it say anything about being frozen in the documents?  Normally in your situation the pension is "deferred", which does not mean the same thing as frozen.

Deferred means that the pension will go up according to inflation and the relevant scheme rules.

It's also a bit unusual what you are saying because pensions with 5% uplift that are in deferred status, normally would have kept up with inflation as they are increased based on cumulative inflation.  

Does the estimate say whether it's in today's money (real terms) or estimated future amount.  Do you have a document that explains how the pension is revalued both in deferment and in payment?

As above best thing might be to ask the pension administrators.

Also going back to your first questions, it's not unknown for pension administrators to make mistakes - in fact there are sometimes posts here from people where the pension admin was demanding money back because they had paid out too much due to a mistake.

Marcon

muswellblue said:

Hi, 

My final salary pension was frozen in 2015. I was told it’s not related to investments but related to the consumer price index and could rise to a maximum of 5% per year. 

I have been getting forecasts for when I’m 55 for the last three years and each year it has gone up. I just received this years forecast and it’s gone down. 

I’m a bit of a novice but thought it would always rise so was a bit surprised. I appreciate it may not rise as much each year due to inflation, but I didn’t think it could go down. 

Am I being a bit thick or have the pension provider made a mistake calculating my forecast?

appreciate any advice on this thanks. 

Your pension wasn't frozen. It will continue to increase in line with the rules of the scheme (subject to statutory minimum requirements).

Given that revaluation in deferment is averaged over the whole period of deferment (ie from the time you leave active membership of the scheme until you access your benefits), and recent inflation has been on the high side, it's definitely one to check with your pension scheme administrators.

xylophone

My final salary pension was frozen in 2015.

You mean that the pension was closed to future accrual and all existing members became deferred members?

Was there no written communication to all members at the time?

Were you all given statements of deferred benefits?

Were you a member of the scheme between 1978 and 1997?

Have you obtained a new state pension forecast?

https://www.gov.uk/check-state-pension