Pension Levelling

knittingnanny1102

I have a very small workplace final salary style pension which offers a leveling option.  I have requested from my provided a couple of quotes asking for projections  for taking my benefits for future dates of 1 and 2 years.  They tell me that they are unable to provide any figures of the leveling option for a projection  they can only do it   for retirement dates of within 3 months.  Are they allowed to do this??   How are you supposed to be able to make informed decisions if you do not have all the facts.  I have looked back into my records and this kind of information  was provided on a previous quote many years ago.  as the pension is relatively small it would be reduced from leveling to  the state pension value so the value is important to any decisions

Mark_d

I would just leave the final salary pension alone and not try to make any "informed" decisions unless you have a thorough understanding of the pension scheme.  

gm0

Pension statements - particularly those related to an earned amount (%) of a former salary.  Which is being indexed for inflation until retirement age - are these days routinely estimated for "right now".   Pension statements and wake up packs are all quite heavily regulated by FCA.   Not always helpfully.  But consistency across providers has some value I suppose. 

There was a time when a lot of products and DC schemes used to err on the high side with assumptions - if this happens then that £ by then.  Perhaps because providers were keen that their pension product should look good.
This got knocked back by the regulator viewing it as a problem leading to complacency on savings rates.  And the assumptions they are forced to use today - bad/worse/terrible scenarios - are more likely to underestimate in most economic conditions.

With a final or average salary earned % scheme they do not know what the inflation indexation will be in advance. (Often it has been RPI or CPI or one of those limited by a cap. And in some cases is trustee discretionary (and so linked to the demographics and funding level of the scheme.  In any event they do not guess at it.

They are not allowed to say "it could be £X and then it is in fact - less than £X and then everyone would be up in arms that they had planned their retirement on what has now turned out to be an overestimate.  Seeking redress (unsuccessfully you would hope).  But at minimum creating a load of noise about being misled.

Forecasts for taking it now a long way out are not helpful as a prediction of the "nominal" figure later. 
However the "real" number now - can be worked with - in today's £ vs today's budgets. To consider whether the DB, State Pension (today) and any DC pots (today) - are sufficient to retire on.

If your scheme indexes at CPI or at 3% or something else. Then you can of course - do the multi-year indexation yourself. Using the average of the metric.  And that will get you in the ballpark

xylophone

You may find this of interest.

https://www.wtwco.com/en-gb/insights/2018/01/pension-levelling-options-an-alternative-liability-management-tool

Are you a current member of the scheme or a deferred member?

What exactly does your scheme guide have to say about the levelling option?

What is normal scheme pension age?

And when do you expect to reach state pension age?

Do you have a GMP?

sandsy

DB pensions typically increase from the time you stop building up benefits (eg when you left the employer or the scheme was closed to new accruals) to retirement. The increases are often inflation linked, but subject to a cap. This means that any projections about the level of the pension at retirement date needs to use an assumption about what future inflation will be. Many defined benefit schemes have become quite nervous about providing projections based on assumptions - as the assumptions will rarely be right. So many schemes have stopped doing projections, even if they did so in the past. 

Without a projection of what the pension would be normally, they can't give you an estimate of what it might be if the pension increases in payment are removed.

Phossy

knittingnanny1102 said:

I have a very small workplace final salary style pension which offers a leveling option.  I have requested from my provided a couple of quotes asking for projections  for taking my benefits for future dates of 1 and 2 years.  They tell me that they are unable to provide any figures of the leveling option for a projection  they can only do it   for retirement dates of within 3 months.  Are they allowed to do this??   How are you supposed to be able to make informed decisions if you do not have all the facts.  I have looked back into my records and this kind of information  was provided on a previous quote many years ago.  as the pension is relatively small it would be reduced from leveling to  the state pension value so the value is important to any decisions

My pension also has a levelling option and the same 3 month rule. I asked for a projection based on me retiring in 3 months so I could see the figures even though I am not planning to retire for a while yet. I got a very detailed breakdown and some papers to sign if I wanted to start my pension.