DB Pension Going into payment - old document includes "Fictional" Personal Pension Amount

Pat38493

I was reading through the old booklet from 1999 about my DB pension scheme as I have initiated the process to put it into payment.  See separate thread here.

I came across an interesting section in the book which I paraphrase below.....

The way the pension benefits are caclulated ..... is quite different from most company schemes.

At retirement you are guaranteed the greater of
a) A pension calculated on the current plan rules which were based on 1/60th of salary up to 2/3rds of final salary.
b) The pension payable from your fictional personal pension account which is tracked alongside, based on you paying 10% per year from the start into the scheme, and based on the investment returns of the main plan.

This part has never been mentioned in any recent documentation or proposals, and I cannot find any documents indicating that this clause was rescinded in the meantime.

I am just wondering if I should ask Mercer/Aptia who are the administrators about this - and ask whether they have confirmed that my "fictional personal pension" doesn't provide higher benefits.

Frankly I doubt it but I had not even noticed this section before.

Tommyjw

It's a DC underpin or often referenced as a 'Value for Money Guarantee' , being that you aren't worse off being in this Scheme than if the company set up a completely generic DC scheme instead.

What usually happens with DB Schemes is at some point, usually (always?)  when the Scheme closed for any future accrual/members so they know they have one data set of everyone, no more contributions, no more people etc, a Scheme actuary will review all the membership and would sign off that the VFM guarantee would never 'bite' (be higher than normal benefits) for anyone. If so, from that point on it's never touched or cared about again and the Scheme administrators overwhelmingly likely dont know it exists, or do but dont do any form of calculation for it. 

Not much i could quickly find to point to more reading other than a quick paragrpah at: https://helpfiles.thepensionsregulator.gov.uk/members/hybriddetails - under "A DB section with a notional DC underpin"

Marcon

I've never come across one of these in practice, so out of curiosity I too did a bit of googling and came up with this: https://www.acted.co.uk/forums/index.php?threads/investments-for-a-db-scheme-with-dc-underpin.11738/

Secret2ndAccount

My DB pension (from the 90's / 00's) has a DC underpin. I get both values in my statement every year. Currently, the DB is running at about 5.5 x the value of the DC.

Pat38493

Secret2ndAccount said:

My DB pension (from the 90's / 00's) has a DC underpin. I get both values in my statement every year. Currently, the DB is running at about 5.5 x the value of the DC.

Yes well this is what I would have expected - that the DB value will be massively higher so there is little point doing the detailed calculation.