A Little More Good News On Uk Pensions

[Guderian]

GuestHouse,

Many thanks for the reply. I will have a look at the links and see if I can fathom out how I should proceed next. I've been in communication by letter and e-mail with the company's pension administration in London. I'm a member of the company pensioners' association, and they may be able to help, but I don't know what my rights are at the moment. Plus the pensioners' association is just a toothless arm of the company in one way or another (offices provided by the company, etc.). The problem is that the company is one of the oil majors, and so the layers of bureaucracy are unbelievable. However, they screwed me badly when I worked for them in Africa, and I won't take that risk again with my pension if I can help it. The trustees are of course all ex-oil company managers and executives, nobody independent there at all. I wouldn't trust one of them as far as I could throw him. I could write to my MP, but she would probably just point me to the sort of links that you have already provided. It's further complicated by my living in Thailand, while all my pension paperwork is back in the UK. Anyway, I'll see what I can do to start sorting things out. Thanks again.

[GuestHouse]

I think you are perhaps worrying a little too much about what you fear might happen instead of concentrating on what it is you need from the Pension Fund.

What you need is an annual statement, which is your right under the pension laws.

You should start by writing to the Pension Trustees and simply state that you have not received an annual pension statement. Then ask if there has been any change in the rules regarding issuing pension statements and if not can they please act to ensure you receive your statement.

No need to go into wider issues or concerns - get them to instruct the Pension Administrators to issue the statement.

On the upside you state your pension is with one of the oil majors - the upside there is that the pension fund is almost certainly fully funded. And, because the pension is covered by UK law, it is well out of reach of the Company itself. And the company is bound by law to provide a raft of financial supports to the pension while it remains 'Open'. - I doubt very much that the Oil Majors are going to close their pension schemes any time soon.

Write to the Trustees and politely ask for a Annual Pension Statement - I'm quite sure they will be able to help.

[GuestHouse]

Oh and another upside to this -

As a Deferred Pension Rights Holder, if there was a financial crisis and the company could not fund the pension (unlikely with an Oil Major) you have more rights than someone still working for the company and paying into the pension.

The Rights are split like this:

Pensioners already receiving pensions have first call on the pension fund

People holding Deferred rights have second call on the pension fund

Active Contributing members have third call.

[pkrv]

Oh and another upside to this -

As a Deferred Pension Rights Holder, if there was a financial crisis and the company could not fund the pension (unlikely with an Oil Major) you have more rights than someone still working for the company and paying into the pension.

The Rights are split like this:

Pensioners already receiving pensions have first call on the pension fund

People holding Deferred rights have second call on the pension fund

Active Contributing members have third call.

Hi GH - Thanks for your thoughts

Do you have a view as to why cash, (in a SIPP) which is in such short supply, is not performing particularly well in terms of interest rates?

It's a curious point.

I was looking at the bonds various banks/building societies where offering a few weeks back - It is possible to get reasonable interest rates (not sky high) and oddly the interest rates for 9 month bonds were better than those for 12 months.

My conclusion on this is that the banks are playing a bet that money supplies will increase in the next 9 months. I also think they are playing something of a balancing act trying to get sufficient funds through the door without committing to the longer term liabilities that longer term bonds entail.

The conclusion I draw from that is perhaps the cash crisis is not as bad as it is made out to be.

--

But as you say, that's off topic.

Sorry I cannot contribute further to your thread this is outside of my experience. What I would say is that the split in rights has in the past (in the UK) been deeply abused - a bit like (but not quite like) equiitable life (or whatever they were called).

You could also say:

It was used to how do I say this? 'boost wages' for longterm 'high flyers' in a company at the expense of short term staff - IMO NO transparency to ones own money. BUT that is just an opinion.

Worst is what you have just said - What I have, I am withdrawing as fast as possible. IMO my pension fund should be my pension fund not someone elses. This is not an attack it is a difference of thought processes, as I have said your posts IMO are deeply valued.

Edited July 18, 2008 by pkrv

[Guderian]

I think you are perhaps worrying a little too much about what you fear might happen instead of concentrating on what it is you need from the Pension Fund.

What you need is an annual statement, which is your right under the pension laws.

You should start by writing to the Pension Trustees and simply state that you have not received an annual pension statement. Then ask if there has been any change in the rules regarding issuing pension statements and if not can they please act to ensure you receive your statement.

No need to go into wider issues or concerns - get them to instruct the Pension Administrators to issue the statement.

On the upside you state your pension is with one of the oil majors - the upside there is that the pension fund is almost certainly fully funded. And, because the pension is covered by UK law, it is well out of reach of the Company itself. And the company is bound by law to provide a raft of financial supports to the pension while it remains 'Open'. - I doubt very much that the Oil Majors are going to close their pension schemes any time soon.

Write to the Trustees and politely ask for a Annual Pension Statement - I'm quite sure they will be able to help.

GuestHouse,

Thanks for the replies. I've recently e-mailed an old friend who worked for the same company and who is also a deferred pensioner. It turns out that this guy also has not received any statements since 2004. He is only a year away from receiving his pension and he was not watching it at all!

Anyway, he contacted the pensions admin people in London (this guy lives in London, whereas I live in Pattaya, so it's not nearly so cheap and easy for me to do), and they told him that no updates have been sent out since 2004, but they will shortly start doing so again. The last letter I had from them simply stated that "As explained in our correspondence last year, we have not provided updated pension values to deferred pensioners since 2004." This sounded to me as if it was no longer their intention to provide them, which is what annoyed me so much. I also wonder why they have not provided these updates? People must have reached their retirement dates during this period, so they will have had to do the calculations for them, therefore it is not impossible. If they can do it for one, they can surely do it for all? I had thought that it was perhaps a penny-pinching measure to reduce admin costs.

So what I plan to do is to e-mail the pensions admin people again and ask them to verify that I will indeed be sent a statement with updated pension information next year, and that my interpretation of their last communication was incorrect (due to their poor choice of words). Assuming that this is OK, I shall leave it rest there, but if they are still shilly-shallying about then I shall contact the pensions advisory service and/or the Trustees. Does that sound reasonable? I'd like to get an update for the missing years as well, before I realised that I was no longer getting updates. I wonder if that would be too much to ask just now – perhaps better to wait until they are actually issuing updates again?

Thanks again for your help.

[GuestHouse]

^ I would write to the administrators, copy to the Trustees and perhaps add an additional letter to the Trustees stating that you believe the absence of an annual report is something that ought to be addressed as an improvement in communicaiton.

When you write to request a report, make sure that you ask for the information that you require - for example: Forcast of Pension at Retirement / Lump sum transfer value.

You don't want to go through all the bother only to receive part of the information you want.

[GuestHouse]

....... What I have, I am withdrawing as fast as possible. IMO my pension fund should be my pension fund not someone elses. This is not an attack it is a difference of thought processes, as I have said your posts IMO are deeply valued.

I think it would be a good idea to first of all determine what exactly it is 'you have'.

As a member of a Defined Benefits Pension what you don't actually have is a 'Personal Fund' - What you do have is Rights to Benefits which you paid for with your Contributions.

And another important point to understand is - It is the duty of the Trustees to provide and protect the 'Benefits' for members of the Pension Scheme along the lines of the Rights Split I have given above.

When you ask for to take out your 'Fund' you are actually asking to exchange cash from THE PENSION FUND for your Rights to Benefits.

A simplistic calculation of the cash value of your Rights to Benefits might be something along the lines of 20X your annual pension (based on their value at the date of withdrawal).

But that is the Simplistic calculation and ignores the Duty of the Pension Fund Trustees - To Protect the Benefit Rights of Members - When you withdraw, you are no longer a member - So the question the Trustees ask is how much can the Pension Fund afford to pay this individual to give up his Pension Rights Without Negatively Impacting Other Members? This is then used to calculate the sum you will receive - In almost all cases it will reduce the sum you expect to receive.

Perhaps the biggest single hit you are likely to have here relates to the Funding % of the Pension.

UK Pension Law requires all Defined Benefit Pension Schemes to maintain a record of the 'Funding %' - This is a calculation of the Pension Fund's Liabilities -(How much it needs to eventually Pay out in Pensions) versus how much Capital is in the Fund - This is then compared with how much it would cost for the Pension Fund to Buy the same benefits if the Pension Fund is wound up.

Almost all pensions run a deficit on this calculation, having a funding level of less than 100%.

This impacts someone exchanging their Benefit Rights because it is the most significant Fraction used in calculating how much the Pension Fund can afford to pay you for Your Pension Benefit Rights.

So if your back of a fag packet calculation gives you a transfer value of 300K - but the Pension Fund % is only 80% (not uncommon) - then you can expect to receive something less than 80% of the 300K you enthusiastically calculated.

Now you are probably thinking - Well if the Pension Fund is only 80% funded then I'm getting out anyway if they can only provide 80% of the pensions they need to provide.

WRONG !

Your Company Pension Fund will be managed as a Non Profit Trust - if it is of any size it is probably putting a great deal of leverage on the stock/bond trading it does to reduce costs (Remember reading how influential Pension Funds are on Companies Listed on the Stock Market?!) So it is highly likely that your Company Pension Scheme has low running and management costs - and it has no Profit/Dividend to Pay out.

The Calculation of Funding % is based on buying Pension Benefits in the open market - Profits/Dividends to Pay, Higher Running Costs etc etc etc.

So just because a Pension Scheme is less than 100% funded, does not mean that there are insufficient funds to pay the pensions it owes/will owe out.

--

You might also consider that the turmoil on the markets these past 10 months will undoubtedly have reduced this Funding % and hence the lump sum you have your eye on.

Edited July 19, 2008 by GuestHouse

[AFKAFSinLOS]

The following article may be of interest:

Second quarter wipes £30bn off British pension funds

http://www.ipe.com/news/Second_quarter_wip...funds_28550.php

The last few posts to me highlight even more reasons for an expat not to continue contribute to UK pensions...if he can help it... At the end of the day, despite the regulatory bodies, legislation etc, there's just too much lack of transparency and too many things can go wrong. When they do go wrong you're stuck with it, and can't do anything before 55... I like my money where I can pick it up and move it if not happy... That's not forgetting all the admin hassle.

As GuestHouse points out, people who are still contributing often rank bottom of the pile... I like to be near the top..

Guderian,

You're not alone in these hassles. One of my schemes only now provides statements when I chase them... GuestHouse gave the right links of where to complain... With only 8 years to go, there's a good chance that it's in your interests to stay put. However, you might want to consider do they have an option on drawing earlier if you're unhappy.

Until recent changes many company schemes would let you take your pension earlier. One of my old schemes had normal retirement date as 60. You could, however, take it early at age 50, and receive about 60% per annum of the value at 50. (They reduced the amount by approx 4% for each year under 60) Now this may seem a big reduction, but bear in mind you get your money for 10 extra years to do with what you want... Legislation will move this to 55 in a couple of years.

But for you, assuming you are 52, taking a reduced pension of say 68% of what you would get at 60, may be an option worth seriously considering. Particularly if you put the money somewhere safe, and don't touch it for the next 8 years...You'd have a nice pot built up to do what YOU want

eg simply put, take 10k p.a from 60 onwards; or take 6.8k pa. from 52 onwards (if possible) By age 60, you'd have drawn 53.6k already, which is a nice cushion vs the lower pension. This 53.6k could have been invested safely/ tucked away for a ran day/ growing to nearer 100k if taking risk... etc etc.

Worth a thought or two, although only you know your own circumstances... Particularly if you are worried about what might happen. A bird in the hand earlier might also be great to enjoy Thai life if you don't p**s it away.

I plan on doing similar with my pensions, but have a bit longer than you to wait...

Edited July 21, 2008 by AFKAFSinLOS

[AFKAFSinLOS]

....... What I have, I am withdrawing as fast as possible. IMO my pension fund should be my pension fund not someone elses. This is not an attack it is a difference of thought processes, as I have said your posts IMO are deeply valued.

I think it would be a good idea to first of all determine what exactly it is 'you have'.

As a member of a Defined Benefits Pension what you don't actually have is a 'Personal Fund' - What you do have is Rights to Benefits which you paid for with your Contributions.

And another important point to understand is - It is the duty of the Trustees to provide and protect the 'Benefits' for members of the Pension Scheme along the lines of the Rights Split I have given above.

When you ask for to take out your 'Fund' you are actually asking to exchange cash from THE PENSION FUND for your Rights to Benefits.

...

I assume pkrv is just referring to taking his pension ASAP or "early". As mentioned above, I would rather take 60% benefits from aged 50 onwards rather than 100% from 60 onwards.

People don't question this as much in the UK, as the alternatives are more limited, and where do they invest the extra is a big question?. Thailand, and other overseas countries really bring this into perspective:

1) You can fund an early retirement in Thailand much more easily than UK, should you have family reasons or just a desire to do so.

2) UK pensions are part of an overall system where you get (albeit a poor) level of state healthcare. In a country like Thailand, where there is no state healthcare for you, you want your money in a pot where you can access it as needed. People overlook how the various factors fit or not... being an expat gives you great freedom if you know what you're doing...

3) You realise there are a whole host of other tax free investments and alternatives, some of which are superior to what you could get in the UK, where you would be taxed on it...

Transfering pensions is sort of somewhere in the middle, for those unhappy with their pension, but can't yet draw it early... or get at it...

Edited July 21, 2008 by AFKAFSinLOS

[pkrv]

Hi GH and AFKAFSinLOS - thanks for your thoughts. OK I will lay my cards on the table.

I am part of the Reuters pension fund, final salary scheme left in 1999 after many years of service and maximum contributions to the fund which is (maybe) guaranteed by the company, that scheme was closed some time ago. I recieve updates and note that Greg Meekings (one of the guys who hired me Global IT director) was appointed to look after the fund as an elected member (sorry not in the industry I may use approximate terms).

The scheme apparently never took a pension holiday and was for a short time underfunded, alarm bells sounded. I shifted as much as I could (about 50% of the funds) to a SIPP under my direct control. However 50% remained in the fund because it was 'protected rights' the first time I ever encountered the term.

I can take my pension from 50 (which conflicts with the description of protected rights I think is 65) this is laid out in a formal contract.

It is also stated that the fund may not in the future be fully funded and of course the golden share in Reuters was over ridden by 'vested interests' Reuters is now US owned by Thompson Financial of whatever spelling I can’t be bothered to look it up.

So what will happen to me in a couple of years when I try to access MY funds and transfer them to an annuity/cash draw down? That I am asking the question does not bode well for the concept of trust (which IMO has gone out of the window).