Scheme with normal retirement age of 60 refusing to pay deferred pension until 65

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
43 replies 5.6K views


  • Seabee42Seabee42 Forumite
    448 Posts
    Part of the problem of confirming GMP benefits is quite frankly HMRC. You can agree the benefit with HMRC then HMRC for no reason can change it. This has been going on for years.

    It is supposed to be a calculation with rules but even so they keep changing.
  • ZelaznyZelazny Forumite
    387 Posts
    Tenth Anniversary 100 Posts Combo Breaker
    Anti-Franking legislation didn't come in until the mid eighties and has no effect on any pension deferred before then.

    Without knowing more, it's hard to say exactly what's happened here, but I ran the numbers for a scenario that might be something like yours and that may give you an idea of how it's worked out

    I'm going to make a few assumptions, as follows. These may or may not be correct, but I'll try to show how the affect the figures:

    1. If the issue is coming up now, I'll assume a person who is 60 now, so would have been 25 when leaving work in 1979.
    2. Average annual salary in the UK for 1979 was around £6,000. This is an early (school leaver) job, so it seems likely that it would be half to two thirds of this amount, so I'll be assuming a salary of £3,500.
    3. I'm handwaving dates a little, assuming actual service is exactly 6 years, that the revaluation can be worked out from age (which will be close, but could be out by a year or two), etc.

    So that gives us:

    Benefits at leaving is the greater of MVFM pension, Accrued benefits or GMP at GMP Payment Age

    We have no way to work out the MVFM benefits, so I will ignore for now.

    Accrued benefits = salary x service x accrual = 3500 x 6 x 1/60 = £350 per year at age 60. No increases are applied to this number.

    GMP is £28.60 per year at leaving. Leaving was 1979, age 65 is at 2019 - difference is 40 years, so GMP increases for 39 years. Increase rate is 8.5% per year, so the increase factor is (1 + 8.5%)^39 = 1.085^39 = 24.08573. This gives a GMP at GMP Payment age of 24.08573 x 28.6 = £688.85 per year (although it's usually worked out weekly instead, so would be 28.6 / 52 = 55p per week, 55p x 24.08573 = £13.25 per week = £689 per year - not too different anyhow).

    So the benefits would be the higher of £350 per year at age 60 or £688.85 per year at age 65.

    Note: the scheme only has to pay one or the other - and in this case they'd pay the £688.85 at age 65.

    If you want to PM me more details, I can re-run the numbers as pertains to your circumstances to give you a better idea of what's actually happened, but I suspect your not going to get anywhere with the Ombudsman as the pension scheme will only be following the rules.
  • Hi Hyub, you mention that firefighters are deferred to 65. This is only for those in the NEW scheme deferring in the NEW scheme as the rules have changed for NEW members. For older deferred members in the old scheme it is still 60 as previous benefits are not changed.

    Thanks again everyone for your advice.
  • hyubhhyubh Forumite
    3.1K Posts
    Ninth Anniversary 1,000 Posts Name Dropper
    Cyberman60 wrote: »
    Hi Hyub, you mention that firefighters are deferred to 65. This is only for those in the NEW scheme deferring in the NEW scheme as the rules have changed for NEW members.

    I cited it merely as an example of a DB scheme that has different NPAs for actives and deferreds, with the underlying point being: different DB schemes have different rules, so an emphasis on legislation that all DB schemes must abide by only gets you so far. That said, the 1992 firefighters' scheme has different NPAs for actives and deferreds too (simplifying slightly, they are just 10 years prior to the 2006 scheme's). I take it by your response that you know your scheme *didn't* have different NPAs for actives and deferreds...?
  • Debt_Free_ChickDebt_Free_Chick Forumite
    13.3K Posts
    Cyberman60 wrote: »
    Surely I should be entitled to a pension however small at age 60 (Normal Retirement Age) as the scheme should at least pay me 6/60ths of my salary on leaving according to normal DBS scheme rules ?

    Can somebody advise me here please ? :(

    Essentially, you will be entitled to a deferred pension of 6/60ths of your salary on leaving, payable at age 60. However, buried in the Rules of the scheme is a statement which essentially says that "only if your pension is sufficient to meet the level of the GMP payable at state pension age (SPA)".

    The problem here is that the deferred pension does not increase. It's fixed at the amount calculated on the day you left.

    Within that pension, the bit that represents the GMP DOES increase, right up to SPA.

    In your case, the inflated GMP is now bigger than the deferred pension (or will be, when you get to SPA). Effectively, your only entitlement now is to a GMP payable at SPA. The good news is your pension will be more than your deferred pension. The bad news is you will have to wait until SPA to receive it.

    Hope this helps

    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • edited 20 May 2014 at 1:31PM
    2.5K Posts
    Hung up my suit!
    edited 20 May 2014 at 1:31PM
    Further to my original query I now have a reply from my pension scheme administrators stating that at the time I was employed quote 'you were required to complete 5 year's minimum pensionable service and to have attained the age of 26'.

    From Aries Pension website the law changed in 1975 BUT I was employed from Sept 1973 so the scheme appears to me to be using a later law as a get-out on the preservation aspect :

    [FONT=Verdana, Helvetica, Arial]06/04/1975[/FONT][FONT=Verdana, Helvetica, Arial]Refunds of employee contributions permitted. Early leavers aged at least 26 and with 5 years' qualifying service entitled to preservation. Benefits under Graduated Pension Scheme cease to accrue.[/FONT]

    Incidentally I was 24 and had completed 6 years service before leaving employment. I am now tempted to go the pensions ombudsman on this. Any views ?
  • PensionTechPensionTech Forumite
    711 Posts
    You can only go to the Ombudsman once you've gone through the scheme's Internal Dispute Resolution Procedure (this is a formal complaints process that you need to specifically invoke).

    My thoughts would be that you are entitled to retire at NRD regardless of whether your benefits will cover GMP at GMP age. At GMP age the scheme needs to step up the pension to make sure GMP is covered but it doesn't usually stop you from retiring at NRD with your accrued benefit - that is usually an unqualified right, even considering lack of GMP coverage. I have only ever seen retirements refused where they are early retirements, which are (unlike normal retirement) generally down to the discretion of the Trustees/employer.

    On preservation: 5 years and age 26 are the statutory requirements for preservation but schemes could grant preserved benefits anyway. If they did so in your case, then you should be entitled to everything that comes with it.

    I'll have a look to see if I can find any piece of legislation that makes it particularly clear, but I have a feeling that it will depend more on your Trust Deed and Rules. In fact it probably depends on the TD&R in place when you left the scheme, and good luck on getting admin to dredge those up! Any letters you got from when you left the scheme could play a vital part in showing whether you have a right to retire at 60 with your accrued benefits.
    I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.
  • edited 20 May 2014 at 4:24PM
    2.5K Posts
    Hung up my suit!
    edited 20 May 2014 at 4:24PM
    Thanks for your reply, PensionTech. I am also getting advice from the Pensions Advisory Service today and will post their reply on here. It appears to me that I will eventually have to lodge a dispute with the pension Scheme of this major worldwide Bank !!

    Incidentally, I have a document of the HSBC pension scheme that states 'The age at which you would normally retire. Normal retirement age for the Midland Section is currently 60, but this will increase to 65 from 1 April 2010.'

    Can they within the law change my deferred NRA of 60 to a later NRA of 65. Surely this is a breach of contract ??? (Answer: Apparently they can as just notified by the PAS. Awaiting further details from them on this.)
  • edited 20 May 2014 at 5:09PM
    PensionTechPensionTech Forumite
    711 Posts
    edited 20 May 2014 at 5:09PM
    This should only apply to benefits accrued after 1 April 2010. As discussed on the other thread, they shouldn't be able to make this change with respect to accrued rights.

    I've found a couple of documents from HSBC that seem to imply that the changes do only apply for future benefits:
    if you have been paying the additional 3% special contribution you will continue to be able to take those benefits unreduced from age 60, rather than a
    reduction being applied for early retirement relative to age 65 for pensionable service accrued from 1 April 2010.

    Early retirement – taking your DBS pension

    Your DBS pension is payable from your Normal Retirement Age. For most members, if you retire early, your
    pension is reduced:

    • for each year you retire before age 60 (for pension built up before 1 April 2010), and
    • for each year you retire before age 65 (for pension built up from 1 April 2010).

    I think TPAS may have misunderstood the question. And I don't think that statement on the HSBC document about NRA applies to you.

    If I were to be even more sceptical, I would say that maybe the administator at the HSBC DBS doesn't realise that your NRA is 60.
    I am a Technical Analyst at a third-party pension administration company. My job is to interpret rules and legislation and provide technical guidance, but I am not a lawyer or a qualified advisor of any kind and anything I say on these boards is my opinion only.
  • Hi PensionTech, another thing that set alarm bells ringing with me is that I asked for a transfer value statement from HSBC which they have supplied today which states my NRA at 65. The value they give is £3091. Are they really so incompetent on NRA or just trying to dupe me ?
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