DB Pension - Options available - either take annual value or transfer to another provider

MrsWenger

FIREDreamer said:

MrsWenger said:

I would be grateful for any information in relation to my enquiry please.

I have a small DB pension from a company I worked for from 1991-1999. I have received a letter from Legal and General which gives two options; an annual pension of £945.00 or a cash sum surrender of £19,740.00. This cash sum was based on Triviality but I have other pensions so the combined value exceeds £30,000. 

I have spoken to Legal & General who advise that as I do not meet the criteria for Triviality my only options are to see if I can transfer to my other pension provider, Aviva, or to take the pension as an annual value. My preference would be to have taken the cash surrender value. Can anyone explain why this is not possible please?

Is £945 the annual pension when you left in 1999 or the annual pension now (it looks a bit low for 8 years service and 25 years in deferment). 

Hi FIREDreamer, it is the annual pension now. It has increased slightly in the revised letter they emailed me after calling them yesterday, £965.28.

MrsWenger

cloud_dog said:

dunstonh said:

You may find it difficult to transfer a DB pension to another provider.   Whilst the rules say that you can transfer without advice it if its under £30k, receiving schemes often will not accept a DB transfer in, regardless of value unless an adviser is transacting it (stakeholder pensions excluded).

When you speak to aviva, make sure you tell them that the source scheme is defined benefit.

Remember that just because the amount is small, doesn't mean it is sensible to transfer it.  Plus, the annual income will increase.  So, it will be less than 20 years before it breaks even (assuming the £945 is the current figure that has been uprated and not the original figure when leaving)

Anecdotally I am aware that Vanguard will (have previously) accept a DB transfer for a value less than £30k.

Thank you cloud_dog.

xylophone

 To start with your state pension (forgive me if this information is superfluous)


At 6/4/16, two calculations were done to establish your starting amount for NSP as you would reach SPA in the new scheme.

It was the higher of

Old Rules

NI qualifying years/30 (max) x Full Basic State Pension + ( Additional State Pension - Deduction for Contracting Out).

New Rules

NIQY/35 (max) x Full NSP - (Contracted Out Pension Equivalent).

As your  latest ( I am assuming to 5/4/24) pension forecast indicates an amount in excess of the current full NSP ( £221.20 a

week), your starting amount was also in excess of a full NSP at 6/4/16.

That is to say it was more than £155.65.

Since then, the £155.65 has increased to £221.20 while the balance (your "protected payment") has increased to  £17.70.

As far as is known at the moment, the £221.20 will increase annually under the triple lock while the PP will increase by CPI.


With regard to the DB pension, I have to agree with  a  previous poster that it does look rather low for seven/eight years

service and 25 years in deferment.

I wonder do you still have your statement of benefits on leaving service showing

Post 88 GMP

Excess over GMP?

and a scheme guide showing how (a) the GMP and (b) the excess revalued in deferment?


I suppose it is possible that you have a S32  (or similar) with L&G where the situation is as described here?


https://www.financialadvice.net/s32_buy_out_plan/zone/1288

That is to say you are receiving only your GMP revalued to age 60 and there is not enough in the policy to pay you anything above the

GMP (SMP) or allow you to take tax free cash?

However, you are guaranteed that your pension will receive an RPI uplift (up to 3% RPI) each April.

This is because where a person has post 88 GMP as part of their pension, the scheme must escalate that portion by up to 3% inflation

(usually CPI nowadays rather that RPI but this is scheme dependent).

https://techzone.abrdn.com/public/pensions/Tech-guide-guaranteed-min-pen#:~:text=Guaranteed minimum pension, commonly known,1978 and 5 April 1997.

You may prefer not to transfer out but keep the pension as part of your guaranteed retirement  provision?

Triumph13

MrsWenger said:

FIREDreamer said:

MrsWenger said:

I would be grateful for any information in relation to my enquiry please.

I have a small DB pension from a company I worked for from 1991-1999. I have received a letter from Legal and General which gives two options; an annual pension of £945.00 or a cash sum surrender of £19,740.00. This cash sum was based on Triviality but I have other pensions so the combined value exceeds £30,000. 

I have spoken to Legal & General who advise that as I do not meet the criteria for Triviality my only options are to see if I can transfer to my other pension provider, Aviva, or to take the pension as an annual value. My preference would be to have taken the cash surrender value. Can anyone explain why this is not possible please?

Is £945 the annual pension when you left in 1999 or the annual pension now (it looks a bit low for 8 years service and 25 years in deferment). 

Hi FIREDreamer, it is the annual pension now. It has increased slightly in the revised letter they emailed me after calling them yesterday, £965.28.

Would I be correct in my guess that this was a part time job?  It doesn't change anything, but it would explain why people were confused about it being so small

MrsWenger

xylophone said:

 To start with your state pension (forgive me if this information is superfluous)


At 6/4/16, two calculations were done to establish your starting amount for NSP as you would reach SPA in the new scheme.

It was the higher of

Old Rules

NI qualifying years/30 (max) x Full Basic State Pension + ( Additional State Pension - Deduction for Contracting Out).

New Rules

NIQY/35 (max) x Full NSP - (Contracted Out Pension Equivalent).

As your  latest ( I am assuming to 5/4/24) pension forecast indicates an amount in excess of the current full NSP ( £221.20 a

week), your starting amount was also in excess of a full NSP at 6/4/16.

That is to say it was more than £155.65.

Since then, the £155.65 has increased to £221.20 while the balance (your "protected payment") has increased to  £17.70.

As far as is known at the moment, the £221.20 will increase annually under the triple lock while the PP will increase by CPI.


With regard to the DB pension, I have to agree with  a  previous poster that it does look rather low for seven/eight years

service and 25 years in deferment.

I wonder do you still have your statement of benefits on leaving service showing

Post 88 GMP

Excess over GMP?

and a scheme guide showing how (a) the GMP and (b) the excess revalued in deferment?  I am not sure if I have these documents, I will check over the weekend.

I suppose it is possible that you have a S32  (or similar) with L&G where the situation is as described here? I believe you are correct when you mention receiving only the GMP valuation based on there not being enough in the pot for more. I will review the information in the links you shared. 


https://www.financialadvice.net/s32_buy_out_plan/zone/1288

That is to say you are receiving only your GMP revalued to age 60 and there is not enough in the policy to pay you anything above the

GMP (SMP) or allow you to take tax free cash? Please see reply above.

However, you are guaranteed that your pension will receive an RPI uplift (up to 3% RPI) each April.

This is because where a person has post 88 GMP as part of their pension, the scheme must escalate that portion by up to 3% inflation

(usually CPI nowadays rather that RPI but this is scheme dependent).

https://techzone.abrdn.com/public/pensions/Tech-guide-guaranteed-min-pen#:~:text=Guaranteed minimum pension, commonly known,1978 and 5 April 1997.

You may prefer not to transfer out but keep the pension as part of your guaranteed retirement  provision? Yes, I think this is something I should revisit and consider.

Thank you again for your reply Xylophone. 

I appreciate you explaining the state pension calculation, it is helpful to understand the methodology used.

As before, I have added replies above.

MrsWenger

Triumph13 said:

MrsWenger said:

FIREDreamer said:

MrsWenger said:

I would be grateful for any information in relation to my enquiry please.

I have a small DB pension from a company I worked for from 1991-1999. I have received a letter from Legal and General which gives two options; an annual pension of £945.00 or a cash sum surrender of £19,740.00. This cash sum was based on Triviality but I have other pensions so the combined value exceeds £30,000. 

I have spoken to Legal & General who advise that as I do not meet the criteria for Triviality my only options are to see if I can transfer to my other pension provider, Aviva, or to take the pension as an annual value. My preference would be to have taken the cash surrender value. Can anyone explain why this is not possible please?

Is £945 the annual pension when you left in 1999 or the annual pension now (it looks a bit low for 8 years service and 25 years in deferment). 

Hi FIREDreamer, it is the annual pension now. It has increased slightly in the revised letter they emailed me after calling them yesterday, £965.28.

Would I be correct in my guess that this was a part time job?  It doesn't change anything, but it would explain why people were confused about it being so small

Good thought Triumph13 but it was a full time job 🙂

I think Xylophone’s comment about there being an insufficient pot is the likely reason. 

MrsWenger

Just a quick update to advise I haven’t been able to find the paperwork yet.

FIREDreamer

MrsWenger said:

Triumph13 said:

MrsWenger said:

FIREDreamer said:

MrsWenger said:

I would be grateful for any information in relation to my enquiry please.

I have a small DB pension from a company I worked for from 1991-1999. I have received a letter from Legal and General which gives two options; an annual pension of £945.00 or a cash sum surrender of £19,740.00. This cash sum was based on Triviality but I have other pensions so the combined value exceeds £30,000. 

I have spoken to Legal & General who advise that as I do not meet the criteria for Triviality my only options are to see if I can transfer to my other pension provider, Aviva, or to take the pension as an annual value. My preference would be to have taken the cash surrender value. Can anyone explain why this is not possible please?

Is £945 the annual pension when you left in 1999 or the annual pension now (it looks a bit low for 8 years service and 25 years in deferment). 

Hi FIREDreamer, it is the annual pension now. It has increased slightly in the revised letter they emailed me after calling them yesterday, £965.28.

Would I be correct in my guess that this was a part time job?  It doesn't change anything, but it would explain why people were confused about it being so small

Good thought Triumph13 but it was a full time job 🙂

I think Xylophone’s comment about there being an insufficient pot is the likely reason. 

This is why I thought the pension was low.

Pension now = £965
Pension when leaving in 1999 = £965 / 1.989 = £485 (reversing out the revaluation in the table below)
For 8 years service this is £60 per year.
For a 1/60 pension this would suggest a pensionable salary of £3,600 pa on leaving in 1999.

Pension = £3,600 x 8/60 = £480.00

That seems very low for a full time salary.

Minimum wage in 1999 was £3.60 per hour so for a 35 hour week would be £6,552 per annum.

Something doesn’t add up here I’m afraid.

Shimrod

FIREDreamer said:

MrsWenger said:

Triumph13 said:

MrsWenger said:

FIREDreamer said:

MrsWenger said:

I would be grateful for any information in relation to my enquiry please.

I have a small DB pension from a company I worked for from 1991-1999. I have received a letter from Legal and General which gives two options; an annual pension of £945.00 or a cash sum surrender of £19,740.00. This cash sum was based on Triviality but I have other pensions so the combined value exceeds £30,000. 

I have spoken to Legal & General who advise that as I do not meet the criteria for Triviality my only options are to see if I can transfer to my other pension provider, Aviva, or to take the pension as an annual value. My preference would be to have taken the cash surrender value. Can anyone explain why this is not possible please?

Is £945 the annual pension when you left in 1999 or the annual pension now (it looks a bit low for 8 years service and 25 years in deferment). 

Hi FIREDreamer, it is the annual pension now. It has increased slightly in the revised letter they emailed me after calling them yesterday, £965.28.

Would I be correct in my guess that this was a part time job?  It doesn't change anything, but it would explain why people were confused about it being so small

Good thought Triumph13 but it was a full time job 🙂

I think Xylophone’s comment about there being an insufficient pot is the likely reason. 

This is why I thought the pension was low.

Pension now = £965
Pension when leaving in 1999 = £965 / 1.989 = £485 (reversing out the revaluation in the table below)
For 8 years service this is £60 per year.
For a 1/60 pension this would suggest a pensionable salary of £3,600 pa on leaving in 1999.

Pension = £3,600 x 8/60 = £480.00

That seems very low for a full time salary.

Minimum wage in 1999 was £3.60 per hour so for a 35 hour week would be £6,552 per annum.

Something doesn’t add up here I’m afraid.

It could be the definition of pensionable salary. For example mine requires the deduction of the lower earning limit from my final salary - for 1999 that's about £3500 so would fit with your calculations in this instance.

Dazed_and_C0nfused

Shimrod said:

FIREDreamer said:

MrsWenger said:

Triumph13 said:

MrsWenger said:

FIREDreamer said:

MrsWenger said:

I would be grateful for any information in relation to my enquiry please.

I have a small DB pension from a company I worked for from 1991-1999. I have received a letter from Legal and General which gives two options; an annual pension of £945.00 or a cash sum surrender of £19,740.00. This cash sum was based on Triviality but I have other pensions so the combined value exceeds £30,000. 

I have spoken to Legal & General who advise that as I do not meet the criteria for Triviality my only options are to see if I can transfer to my other pension provider, Aviva, or to take the pension as an annual value. My preference would be to have taken the cash surrender value. Can anyone explain why this is not possible please?

Is £945 the annual pension when you left in 1999 or the annual pension now (it looks a bit low for 8 years service and 25 years in deferment). 

Hi FIREDreamer, it is the annual pension now. It has increased slightly in the revised letter they emailed me after calling them yesterday, £965.28.

Would I be correct in my guess that this was a part time job?  It doesn't change anything, but it would explain why people were confused about it being so small

Good thought Triumph13 but it was a full time job 🙂

I think Xylophone’s comment about there being an insufficient pot is the likely reason. 

This is why I thought the pension was low.

Pension now = £965
Pension when leaving in 1999 = £965 / 1.989 = £485 (reversing out the revaluation in the table below)
For 8 years service this is £60 per year.
For a 1/60 pension this would suggest a pensionable salary of £3,600 pa on leaving in 1999.

Pension = £3,600 x 8/60 = £480.00

That seems very low for a full time salary.

Minimum wage in 1999 was £3.60 per hour so for a 35 hour week would be £6,552 per annum.

Something doesn’t add up here I’m afraid.

It could be the definition of pensionable salary. For example mine requires the deduction of the lower earning limit from my final salary - for 1999 that's about £3500 so would fit with your calculations in this instance.

That's harsh 😥