The Lemon Fool

I am over retirement age and still have two outstanding pensions that are unclaimed, because at the time I couldn’t understand the options on the application form, especially the Lifetime Allowance part. Each provider wanted to know about the other, but neither existed at the time.

Fictitious figures here, 2 off, each £1500 pa, with a lump sum of £5000, being claimed 5 years late.

Are there people here who can help, or do I need to go to some paid-for advice, and if so does the amount of pension justify what might be a high charge? Can I get it so wrong as to lose out lots?

I have had two attempts at sorting this, and given up each time. There was too much other stuff in my life at the time due to being a carer. I am now a little more free to sort myself out.

Thanks.

There are qualified people here who can advise. It may help to add more details, e.g. are they final salary/defined benefit, or defined contribution, etc?

fourtwentyfour wrote:I am over retirement age and still have two outstanding pensions that are unclaimed, because at the time I couldn’t understand the options on the application form, especially the Lifetime Allowance part. Each provider wanted to know about the other, but neither existed at the time.

Fictitious figures here, 2 off, each £1500 pa, with a lump sum of £5000, being claimed 5 years late.

Are there people here who can help, or do I need to go to some paid-for advice, and if so does the amount of pension justify what might be a high charge? Can I get it so wrong as to lose out lots?

I have had two attempts at sorting this, and given up each time. There was too much other stuff in my life at the time due to being a carer. I am now a little more free to sort myself out.

Thanks.

In addition to fca's query, have you received any annual statement(s) and if below age 75 there are more options.

They are preserved pensions from monthly paid jobs where I paid a small percentage of salary each month. I left my last job in 1991 and have received no annual statements, only two invitations to make a claim. One is from the Civil Service, and the other a well-known telecoms provider, if that helps. I guess they are final salary, but I am not sure yet, and I don’t understand the terms defined benefit or defined contribution, but at first sight on looking up the definitions they appear to be defined benefit, although I would say my contribution was defined by being a percentage of salary. I am not over 75.

The first question for the application forms is how do I know the LTA figure from one provider to insert in the application for the other when I am applying for both in the same year? I have seen a figure of less than 2.5% in one of the documents, but not the other.

How do I work out whether to take the pension as offered, or to change the lump sum into monthly amounts? The decision would be made on which gives me the most tax free cash, I suppose. I have a very low income but I can manage easily using savings. Should I be able to do the calculations myself, are there clear rules? Or is it not worth the bother of thinking about it?

Using the figures above as a reference, assuming they were current at retirement age, some years ago, will I be offered an increase in the lump sum, because I have not claimed it for several years? Will the annual pension payment be increased for the same reason? In the letters inviting me to claim do they show figures at retirement, of values payable now?

If an answer is to pay for advice, there is a chance the cost would be more than a years pension, is it worth it?

Thank you.

If you left work in 1991, it's highly likely (in my view) that the Civil Service pension was a defined benefit scheme - essentially you would have accrued a defined number of years pensionable service and this would have been converted into a pension value by multiplying it by a given fraction (I think the PCSPS was an eightieths scheme - so you would get 1/80th pf your final salary * the length of your pensionable service.

Very crudely, if you worked for the Civil Service for say 20 years, and you left conveniently on the anniversary of joining, you would have 20 years pensionable service. You then take your annual salary at leaving and multiply it by 20/80. So if you earned £20,000 p.a. in 1991, and left with 20 years service, the pension would be worth £5000. In between then and now, it would have been subject to Pensions Increase based on inflation (the RPI). That should work out around £10800 today. I think there might be a difference on the amount of increase pre and post normal reirement date though.

I think the "telecoms provider" pension may well be 'final salary' too though the fractions applicable may be different.

According to https://www.moneyadviceservice.org.uk/e ... on-savings

For defined benefit pension schemes, you calculate the total value by multiplying your expected annual pension by 20. In addition, you need to add to this the amount of any tax-free cash lump sum if it is additional to the pension. In many schemes, you would only get a lump sum by giving up some pension, in which case the value of the full pension captures the full value of your payouts. So you are likely to be affected by the lifetime allowance in 2020-21 if you are on track for a final salary pension (with no separate lump sum) of more than £53,655 a year.

So you should be able to work out the percentage of the LTA (currently £1,073,100) used by by each pension if they are telling you the total value of the pension (Annual pension x 20).

HTH

fourtwentyfour wrote:Using the figures above as a reference, assuming they were current at retirement age, some years ago, will I be offered an increase in the lump sum, because I have not claimed it for several years? Will the annual pension payment be increased for the same reason? In the letters inviting me to claim do they show figures at retirement, of values payable now?

What you need to ask them is mostly simple.

If you were to start taking benefits in the near future, what would they pay you? That's both in the form of a taxable monthly or annual amount and, possibly or, a lump sum, sum of which may be taxable.

By way of a clue, the Civil Service schemes of the 1980s would likely have promised you on retirement, but after you had left their employment, a payment each year of
(your salary when you left) multiplied by
(the number of years you worked for them) and divided by 80.
plus
That annual amount multiplied by 3 as a tax free lump sum.

This would have been revalued in some manner, either by the change in National Average Earnings since 1991 or movement in RPI.

Large companies, particularly ones previously in public ownership aped the Civil Service.

In addition to the starting amounts, there's likely to be a spouse's entitlement and the annual payments would be increased with an inflation measure.

As well as that, there would likely be an uplift based on the period since the nominal retirement age. But as above, put the direct question to them, what do I get?

The Lifetime Allowance for those type of benefits is just 20 times the annual income plus any cash. Again ask what it is.

Thank you, I will study this tonight, but I think I will be able to make a better start at it than before.

Just to be clear, I think salaries were in the low thousands, I moved jobs often and lost benefits on the way. The last, but better paid job didn't provide a pension, I think. So, the amounts to start with are as above, at the day payable. Does that make sense? I think the civil service job counts as 8 years, and the other about 2.

So, fictitious figures just because I am wary of posting too much stuff here, 2 pensions, each £1500 pa, paid monthly, with a lump sum of £5000, all being claimed 5 years late.

I really need to get the forms back and get the pensions now, but these are obstacles to doing so.

Thanks

FYI - your example LTA % would be ((20 x £1,500) + £5,000)/£1,073,100 = 3.3%. Yes call them up, complete the forms and get them back!

fca2019 wrote:FYI - your example LTA % would be ((20 x £1,500) + £5,000)/£1,073,100 = 3.3%. Yes call them up, complete the forms and get them back!

Aren't the providers supposed to tell the claimant what the LTA percentage is? At the benefit amounts suggested it's not material anyway.

In order to not complicate matters, I would draw the pensions in order of size. Then once one pension is commenced and you have the LTA %, start to claim the other pension. I.e. don't confuse the system by claiming both at the same time!

Have you had your free consultation with the Pensions Advice Service yet?

I wasn't aware of a free consultation service....thanks

Ok, I have the site, I'll ask them.

The ‘free guidance’ is Pensionwise, but it only covers DC pensions.

https://www.pensionwise.gov.uk/en

The Pensions Advisory Service do have a helpline for individual DB queries.
However if these are DB pensions surely you just need to get them into payment as soon as possible? Every month it’s not being paid is money left on the table, surely?

Just read through your info again. If you have a ‘very low income’ then I can’t imagine the LTA being an issue. If you don’t know the answers to questions on the forms, just do the best you can, call the providers and explain and I’m sure all will be fine.

Some DB schemes will increase your pension if you delay taking it, but others will not. I suspect the civil service pension will not have increased other than by inflation for the time you have delayed claiming it. You are losing money. Just fill in the forms as best you can and start getting the income!

Do you mean that if I didn't apply for 5 years they keep that money, and don't make it up by increasing the amount monthly, or by a lump sum of back pay? That doesn't seem right, does it?

I now remember asking Pension Wise some time ago, I think that they refused to help, but I can't remember why.

Thanks.

fourtwentyfour wrote:Do you mean that if I didn't apply for 5 years they keep that money, and don't make it up by increasing the amount monthly, or by a lump sum of back pay? That doesn't seem right, does it?

I now remember asking Pension Wise some time ago, I think that they refused to help, but I can't remember why.

Thanks.

No back pay.
The future payments are subject to the providers' rules until your pensions actually commence, e.g indexation, late retirement.

https://www.pensionsadvisoryservice.org ... ment%20age.

Please note that you may not receive the pension payments you would have received (had you retired at your normal retirement age) as a lump sum or series of additional payments at the time you actually retire in addition to your starting pension.

Please note that not all schemes increase benefits paid after normal retirement age. How benefits are treated will depend on the rules of the scheme. You should ask your scheme administrator to clarify how benefits will be dealt with if you defer taking them.

fourtwentyfour wrote:How do I work out whether to take the pension as offered, or to change the lump sum into monthly amounts?

The sums for these numbers are going to be based on your predicted lifespan, so to do any comparison, first work out how many years that is likely to be.
Then total up X number of years times the monthly payments.
The income option will probably look like more money than the lump sum, but dont forget you could invest the lump sum and earn interest.

Mostly it will come down to the tax advantages of taking money now vs later. If your pension income is likely to be above the personal allowance, then taking a lump sum will allow you to save some tax. You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum.

One reason you might not want to take a lump sum is if the income option is index linked and you expect that indexation to outperform any investments you might make with a lump sum. This is kind of unknowable but you can get a rough idea by looking at past performance.

fourtwentyfour wrote:Do you mean that if I didn't apply for 5 years they keep that money, and don't make it up by increasing the amount monthly, or by a lump sum of back pay? That doesn't seem right, does it?

I now remember asking Pension Wise some time ago, I think that they refused to help, but I can't remember why.

Thanks.

Pensionwise, as I said above, deal with DC pensions and not DB pensions. The Pensions Advisory Service will deal with queries about DB pensions. Google them, they have a telephone helpline. Although I am not sure there is anything much for them to deal with, the action you need to take is quite clear.

It is up to you to claim your pension when it falls due. As I said, some DB schemes, generally the private sector ones, uprate the pension if you defer taking it beyond your normal retirement date. The public sector ones generally don’t. It’s not the only example where if you fail to claim something, you lose it. I’m simply trying to help by suggesting you should not delay this action any longer!

Yes, I've got it. I will do so immediately.

The situation has changed from when I first posted. Is it likely that an 'expert' can help me to get a better deal over the lost years than I might do myself?

Thanks.

fourtwentyfour wrote:Is it likely that an 'expert' can help me to get a better deal over the lost years than I might do myself?

I wouldn't have thought so, as what the scheme pays out in which situations is prescribed by the scheme rules. You should have been given a copy of those when you first joined the scheme but if you don't still have them you can ask the scheme for a copy.

mc2fool wrote:

fourtwentyfour wrote:Is it likely that an 'expert' can help me to get a better deal over the lost years than I might do myself?

I wouldn't have thought so, as what the scheme pays out in which situations is prescribed by the scheme rules. You should have been given a copy of those when you first joined the scheme but if you don't still have them you can ask the scheme for a copy.

They might also be on the internet. Many companies that run schemes will have a designated website for members, although you might need to register etc. They might also have "contact us" options that will be quicker than "snail mail" and usually FAQ sections too. I understand if you are reluctant to mention the specific companies/schemes but it might be worth "a google". Even if you aren't an "internet techie" the process won't be any more challenging than registering here, and posting etc. which you have managed to master!