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  • FIRST POST
    • beamyup
    • By beamyup 16th May 19, 9:48 PM
    • 62Posts
    • 16Thanks
    beamyup
    Was it DB or DC? Did my old provider try to confuse matters?
    • #1
    • 16th May 19, 9:48 PM
    Was it DB or DC? Did my old provider try to confuse matters? 16th May 19 at 9:48 PM
    Recently I set about transferring the last of my legacy pensions to Pensionbee.

    This last one was a Barclays Bank pension (Afterwork) , which I believed to be DC.

    During transfer, Pensionbee got in touch with me to inform me that this was in fact a DB scheme, so they could not continue without me seeking advice from an IFA etc, as per the rules for a DB scheme.

    So, I got back in touch with Pensionbee and asked them to "double check" as I did not believe it was DB!

    Pensionbee did a good job in chasing them up and replied with:
    We've called Towers Watson again about this, as the paperwork isn't clear on the matter and they told us over the phone that is was a DB scheme (hence our original confusion!).

    Apparently this is a defined contribution pension, but it has a 'DB underpin'. This means that you don't need to seek any financial advice and we can continue with the transfer as before.
    This was good, so I carried on and transferred my pension as planned.

    I have no idea what the "DB underpin" is. I cannot find it mentioned in the documentation and Pensionbee could not get that info from TW!

    My point here is. How come Towers Watson got this wrong? Did they get it wrong? or is it some kind of policy to try to hold funds by confusing people?

    Afterwards, I spoke to an IFA about this (in passing - not under paid advice) he said that this happens quote often with some of these legacy providers.

    I am glad my pension was transferred however I am posting this to get people's thoughts and perhaps to warn others not to just accept what the pension firms say.
    Last edited by beamyup; 16-05-2019 at 9:54 PM.
Page 1
  • jamesd
    • #2
    • 16th May 19, 10:04 PM
    • #2
    • 16th May 19, 10:04 PM
    Towers Watson may have got it right because the DB underpin value could well be higher than the DC value. Depends on how the investments did and just what the underpin value is based on.

    Because the underpin leaves the employer exposed to the risk of extra costs if the underpin ends up being used it's clearly in the interest of the employer for employees with an inactive underpin to transfer out because that gets rid of the underpin cost risk. Since the employee is losing the protection of the underpin it's much less likely to be a good choice for them.

    What caused you to want to transfer out at the cost of losing the protection?
    Last edited by jamesd; 17-05-2019 at 1:36 AM.
    • enthusiasticsaver
    • By enthusiasticsaver 16th May 19, 10:05 PM
    • 8,457 Posts
    • 19,527 Thanks
    enthusiasticsaver
    • #3
    • 16th May 19, 10:05 PM
    • #3
    • 16th May 19, 10:05 PM
    How old was the Barclays pension? I have a DB pension with Barclays administered by Towers Watson but it is definitely a DB one. It is a very old one though. Never heard of a DC one with a DB underpin. Have you given up some protected rights by transferring out?
    Early retired in December 2017

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    • ArchaeoNeo
    • By ArchaeoNeo 17th May 19, 6:03 AM
    • 13 Posts
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    ArchaeoNeo
    • #4
    • 17th May 19, 6:03 AM
    • #4
    • 17th May 19, 6:03 AM
    I've got one of these and I may be able to shed a little light on things from my own research. The Barclays Afterwork Scheme replaced the 1964 Scheme which was a final Salary pension - I've got one of these as well from the first time I worked for Barclays.

    Afterwork comprises two elements: a Credit account and an Investment account. The Credit account is made up from employer contributions and in deferment will increase with (I think) CPI. It's value can never go down. The documentation refers to it as a Cash Balance and a foundation for your pension. As it is guaranteed not to decrease in value I suppose that's why it's been referred to as a DB underpin - but I've not heard it called that before.
    The Investment account is made up from your contributions, any transfers in and I think matched contributions if you chose to do this. This account is invested in funds and is at the mercy of the markets. The is a whole raft of Lifestyle funds as a default but I believe you can pick and choose if you fancy a dabble.
    The charges are low, typically less than 0.3% but the fund is geared up to you buying an annuity at your NRD so it may not be suitable for your needs. I am in the middle of transferring out the Investment part into a SIPP as I think I can do better and an annuity is not part of my planning as I have DB provision as well. I'm leaving the Credit account where it is for now as I enjoy the guaranteed increases and I can plan well for what this will be worth when I eventually choose to hang up my cloak and sword!
    Hope this helps.
    • beamyup
    • By beamyup 17th May 19, 6:47 AM
    • 62 Posts
    • 16 Thanks
    beamyup
    • #5
    • 17th May 19, 6:47 AM
    • #5
    • 17th May 19, 6:47 AM
    Afterwork comprises two elements: a Credit account and an Investment account. The Credit account is made up from employer contributions and in deferment will increase with (I think) CPI. It's value can never go down
    Thank you for the above it MAY now make sense.
    because
    1) The fund had risen by CPI (approx) in last 12 years. and it was called the "Credit Account" (that's the only fund I had)
    2) My transfer out value was approx 5% higher than my credit account value. Which could have been an actuarial increase to compensate for the "protection"

    What caused you to want to transfer out at the cost of losing the protection?
    This is a small part of my entire pension provision, I wanted transparency and the ability to manage within a SIPP. I have no need/interest in CPI linked inflexible pot.


    So, because of this being a "credit account" - do people here think this this is DB? And should I have needed IFA advice as if it was DB? (its was more than 30k)
    • Albermarle
    • By Albermarle 17th May 19, 2:24 PM
    • 714 Posts
    • 413 Thanks
    Albermarle
    • #6
    • 17th May 19, 2:24 PM
    • #6
    • 17th May 19, 2:24 PM
    Normally DB means a guaranteed monthly pension until you die, with the level of payment related to your final salary and years of service . So this is nothing like a normal DB scheme.
    It looks like a DC scheme with some special arrangement, where half the value was protected against market fluctuations
    In reality most likely the other part , which was in funds , probably grew more over the years anyway.
    • dunstonh
    • By dunstonh 17th May 19, 2:37 PM
    • 98,260 Posts
    • 66,483 Thanks
    dunstonh
    • #7
    • 17th May 19, 2:37 PM
    • #7
    • 17th May 19, 2:37 PM
    And should I have needed IFA advice as if it was DB? (its was more than 30k)
    I am surprised that pensionbee continued with a DC pension with a DB underpin transfer as that actually gets classified under pension transfer permissions and those things usually see the providers say they want advice sought.
    Last edited by dunstonh; 17-05-2019 at 2:41 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • atush
    • By atush 17th May 19, 2:42 PM
    • 17,619 Posts
    • 11,139 Thanks
    atush
    • #8
    • 17th May 19, 2:42 PM
    • #8
    • 17th May 19, 2:42 PM
    I've got one of these and I may be able to shed a little light on things from my own research. The Barclays Afterwork Scheme replaced the 1964 Scheme which was a final Salary pension - I've got one of these as well from the first time I worked for Barclays.

    Afterwork comprises two elements: a Credit account and an Investment account. The Credit account is made up from employer contributions and in deferment will increase with (I think) CPI. It's value can never go down. The documentation refers to it as a Cash Balance and a foundation for your pension. As it is guaranteed not to decrease in value I suppose that's why it's been referred to as a DB underpin - but I've not heard it called that before.
    The Investment account is made up from your contributions, any transfers in and I think matched contributions if you chose to do this. This account is invested in funds and is at the mercy of the markets. The is a whole raft of Lifestyle funds as a default but I believe you can pick and choose if you fancy a dabble.
    The charges are low, typically less than 0.3% but the fund is geared up to you buying an annuity at your NRD so it may not be suitable for your needs. I am in the middle of transferring out the Investment part into a SIPP as I think I can do better and an annuity is not part of my planning as I have DB provision as well. I'm leaving the Credit account where it is for now as I enjoy the guaranteed increases and I can plan well for what this will be worth when I eventually choose to hang up my cloak and sword!
    Hope this helps.
    Originally posted by ArchaeoNeo
    This is what my OH had, and we just transferred it out into a Sipp. It is DC, not DB.
    • beamyup
    • By beamyup 17th May 19, 2:49 PM
    • 62 Posts
    • 16 Thanks
    beamyup
    • #9
    • 17th May 19, 2:49 PM
    • #9
    • 17th May 19, 2:49 PM
    I am surprised that pensionbee continued with a DC pension with a DB underpin transfer as that actually gets classified under pension transfer permissions and those things usually see the providers say they want advice sought.
    Originally posted by dunstonh
    TW SAID it was that (a DC pension with a DB underpin) - but was it really? the "credit account" fund I had is guaranteed to rise a a certain rate, no more no less. Is that an underpin really?

    I find it amazing that this can be so subjective.
    • AnotherJoe
    • By AnotherJoe 17th May 19, 5:51 PM
    • 14,224 Posts
    • 16,927 Thanks
    AnotherJoe
    It can be confusing. I am sure that TW were not deliberately confusing you, IME they are confused enough anyway
    Just to explain a possible source of confusion I have exactly such a pension. It is a "hybrid", in that it's DB, based on my final salary, so there is a calculated amount based on that I will get. However, underlying the guaranteed pension is an amount of money in a selection of funds. Those funds could in theory grow to such a size that they eclipse the guarantee however in order to do that they would need to grow hugely. Not. Gonna. Happen.
    So, whilst I have transferred my other company pensions, I have left this well alone and will take the DB pension.
    Whether it was a good decision on your part to transfer, depends on what the underpin meant for you.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • hyubh
    • By hyubh 17th May 19, 6:12 PM
    • 2,463 Posts
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    hyubh
    Going by what people have said, namely:

    1) The DB underpin was a cash balance arrangement

    2) There were no safeguarded benefits with respect to transferring out to a pure money purchase arrangement

    I'd say *both* WTW and PensionBee were correct, in their own way. A pure cash balance scheme is where there is a guaranteed rate of return (typically only inflation proofing) on contributions made until NPA, however at NPA, there is no DB income due, just the revalued contributions to purchase an annuity with or transfer out. Technically such an arrangement was (is) classed as 'defined benefit' in law, however 'freedom and choice' legislation brackets them with money purchase arrangements as not involving safeguarded benefits, and therefore not requiring professional advice to transfer out.
    • beamyup
    • By beamyup 17th May 19, 9:18 PM
    • 62 Posts
    • 16 Thanks
    beamyup
    Going by what people have said, namely:

    1) The DB underpin was a cash balance arrangement

    2) There were no safeguarded benefits with respect to transferring out to a pure money purchase arrangement

    I'd say *both* WTW and PensionBee were correct, in their own way. A pure cash balance scheme is where there is a guaranteed rate of return (typically only inflation proofing) on contributions made until NPA, however at NPA, there is no DB income due, just the revalued contributions to purchase an annuity with or transfer out. Technically such an arrangement was (is) classed as 'defined benefit' in law, however 'freedom and choice' legislation brackets them with money purchase arrangements as not involving safeguarded benefits, and therefore not requiring professional advice to transfer out.
    Originally posted by hyubh
    Thanks, that sounds like it is spot on!

    So PB and TW were both pretty confused (to be fair - the confusion came from TW!) as they did not know this information. and with my prompting then - randomly - we got to the right outcome (a DC style transfer) - without anyone being any the wiser.
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