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  • FIRST POST
    • BML
    • By BML 15th Apr 19, 3:38 PM
    • 156Posts
    • 8Thanks
    BML
    Percentage effect reduction over 25 years.
    • #1
    • 15th Apr 19, 3:38 PM
    Percentage effect reduction over 25 years. 15th Apr 19 at 3:38 PM
    Optimistic as it may be I have always had faith that my employer would treat me fairly when it came to my pension and as a result I never bothered to check any of the details. I was made redundant some 25 years ago and a week or so ago I received my annual pension statement. For the first time in 25 years I looked at it and was surprised to see that there was no annual increase so I asked them why this should because my other pension gave me an average 2.5 percent and even my Army War Disability pension gives an annual increase.

    The answer I received stated, "The Plan provides increases in line with Legislation. Legislation dictates the level of increase that must be applied to pension benefits based on the period when they were accrued. For benefits accrued before 6 April 1997, there is no statutory requirement to increase the pension. I can confirm that this has been the case throughout your retirement."

    In other words instead of a small annual increase my pension has been reducing by whatever the rate of inflation has been over the past 25 years. Regrettably I'm not very numerate so I'm unable to calculate what my ignorance has cost me. Obviously that is entirely my fault although it would be interesting to know if the way that company has behaved is the way that most British organisation have.
    Last edited by BML; 15-04-2019 at 3:39 PM. Reason: Reduce paragraph space.
Page 1
    • JoeCrystal
    • By JoeCrystal 15th Apr 19, 3:48 PM
    • 1,619 Posts
    • 1,083 Thanks
    JoeCrystal
    • #2
    • 15th Apr 19, 3:48 PM
    • #2
    • 15th Apr 19, 3:48 PM
    If you let us know what was your accrued pension when you were made redundant, we can probably work it out. You can expect British companies to save money as much as possible. These DB pensions are very costly to run after all. It is unfortunate that you didn't check the details, but at least you know what you will be getting when you reach the pension age.
    • 232607
    • By 232607 15th Apr 19, 3:57 PM
    • 131 Posts
    • 75 Thanks
    232607
    • #3
    • 15th Apr 19, 3:57 PM
    • #3
    • 15th Apr 19, 3:57 PM
    A £1000 invested 25 years ago @ 2.5% annual return would now be worth £1867.
    As a rough estimate you could say your pension has nearly halved in value over 25 years by virtue of having no increases.
    Coís are not obliged to apply increases pre 1997.
    Some do, some donít although I know the Co I work for do.
    I not sure how common it is for Coís not to apply increases.
    • hugheskevi
    • By hugheskevi 15th Apr 19, 4:05 PM
    • 2,197 Posts
    • 2,851 Thanks
    hugheskevi
    • #4
    • 15th Apr 19, 4:05 PM
    • #4
    • 15th Apr 19, 4:05 PM
    To note the rules are different depending on whether the pension is being revalued or indexed.

    Revaluation occurs between date of leaving the pension and date pension is commenced. For pension accrued from 1/1/1985 there is a statutory minimum level of revaluation. Pension accrued prior to this date does not have to have any revaluation under legislation (but scheme rules may provide this).

    Indexation occurs once the pension is in payment. Only pension accrued after 5/4/1997 has statutory minimum indexation. Pension accrued prior to this date does not have to have any indexation under legislation (but scheme rules may provide this).
    • BML
    • By BML 15th Apr 19, 5:07 PM
    • 156 Posts
    • 8 Thanks
    BML
    • #5
    • 15th Apr 19, 5:07 PM
    • #5
    • 15th Apr 19, 5:07 PM
    I'm 83 this year and was made redundent in 1993 so fit as I may feel my options are shortening. I will check and see what my accrued pension was when made redundant. Many thanks.
    • BML
    • By BML 15th Apr 19, 5:10 PM
    • 156 Posts
    • 8 Thanks
    BML
    • #6
    • 15th Apr 19, 5:10 PM
    • #6
    • 15th Apr 19, 5:10 PM
    I suspect that I'm talking Peanuts because I joined the company in 1990 and left in 1993. My fault but at least it may prove an option lesson to others to actually look into those things.
    • Pension Geek
    • By Pension Geek 15th Apr 19, 5:58 PM
    • 176 Posts
    • 133 Thanks
    Pension Geek
    • #7
    • 15th Apr 19, 5:58 PM
    • #7
    • 15th Apr 19, 5:58 PM
    I'm 83 this year and was made redundent in 1993 so fit as I may feel my options are shortening. I will check and see what my accrued pension was when made redundant. Many thanks.
    Originally posted by BML
    Why are you not taking the pension if you are 83 years of age? You will have lost out on several years of income by doing that.
    Not an expert, but like pensions, tax questions and giving guidance. There is no substitute for tailored financial advice.
    • ffacoffipawb
    • By ffacoffipawb 15th Apr 19, 9:11 PM
    • 2,651 Posts
    • 1,806 Thanks
    ffacoffipawb
    • #8
    • 15th Apr 19, 9:11 PM
    • #8
    • 15th Apr 19, 9:11 PM
    Why are you not taking the pension if you are 83 years of age? You will have lost out on several years of income by doing that.
    Originally posted by Pension Geek
    I was under the impression he was getting a pension but that it was not escalating [much] in payment.
    Financial Independence with SIPP in June 2019 (all being well).
    Too young to retire - going part time 2 days a week as a test.
    • BML
    • By BML 15th Apr 19, 10:15 PM
    • 156 Posts
    • 8 Thanks
    BML
    • #9
    • 15th Apr 19, 10:15 PM
    • #9
    • 15th Apr 19, 10:15 PM
    I started taking the pension in 1993 but have simply not looked into whether I was receiving an annual increase until a week or so ago assuming that I was. I then discovered that I am not receiving any annual increase and never have.
    • ffacoffipawb
    • By ffacoffipawb 16th Apr 19, 4:37 AM
    • 2,651 Posts
    • 1,806 Thanks
    ffacoffipawb
    I started taking the pension in 1993 but have simply not looked into whether I was receiving an annual increase until a week or so ago assuming that I was. I then discovered that I am not receiving any annual increase and never have.
    Originally posted by BML
    Only Post 1988 GMP and Post 1997 non-GMP has, by law, to increase in payment.

    Any better than this (e.g. escalation on Pre 1997 non-GMP) would be in the scheme rules.

    Maybe you have no GMP because the scheme was contracted in?
    Financial Independence with SIPP in June 2019 (all being well).
    Too young to retire - going part time 2 days a week as a test.
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