DB Pension - options and errors

Foreverafter

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I recently became redundant from my job after 27 years – the first 7 were full time and the remaining 20 were on a job-share basis. I received my ‘Statement of Pension Benefits on Leaving Service’ three months after leaving my job. This offers me two options on my Defined Benefit pension. The first is to defer my pension of Euro15,000 until my normal retirement date and the second option is to transfer the benefit – the amount is Euro276,000 approx. I am 53 years of age shortly and my pension is effective from 60. Which option should I choose? Obviously I would like the fund to grow but in a very safe environment.

Secondly, my annual pension statement going back as far as 2007 and from then on to 2015 has stated my deferred benefit at normal retirement date if service terminated on each particular year of the statement at a much more substantial figure than the amount quoted on my statement on leaving service which I received three months ago. The difference is large, e.g. my annual pension statement for 2015 quoted a figure of 23,720 p.a. versus the 15,000 on my actual statement once I had left service. I left my employment believing my pension at 60 would be 23,720 p.a. according to my 2015 annual pension statement. I now realise I should not have taken the annual statements at face value as this figure has been quoted incorrectly on all my statements going back as far as 2007. Do I have any case for appealing this error? I have called and emailed the pension fund administration as far back as June 5th and they still have not addressed the issue, only to say by email two weeks ago that they are looking into it.

I hope this is not too confusing and any advice would be most welcome.
 
One explanation is the fund is underfunded and your pension now reflects this.

Whether to transfer out or not is a decision only you can make. The transfer value is calculated in such a way that it is unlikely that you will get a better pension from it than if you stayed (and the scheme remained at the same funding levels). But what if the underfunding isn't rectified?

I wrote a blog on this a while back. http://www.bluewaterfp.ie/pensions-2/defined-benefit-pension-plan-should-i-transfer-out/


Steven
www.bluewaterfp.ie
 
The transfer value may be reduced for underfunding, but the amount of your deferred pension should not be affected, unless the scheme is so badly funded that the trustees have sought (and obtained) a Section 50 Order reducing members' accrued benefits. If this had happened, a consultation period would have been required, so it seems unlikely.

What seems more likely is that there was an error in your annual benefit statements. If this is the case, it was probably due to failure to allow for the fact that you had been job sharing for a number of years. If redundancy was voluntary and if you made a decision to accept the redundancy package on offer in the belief that you would be entitled to a much higher deferred pension, then you MAY have a case against the scheme's administrators, but only if you can prove that you were misled and that this influenced your decision.

Regarding whether or not you should take a transfer value, Steven's blog is an excellent summary of the pros and cons. The key issue is whether you believe the scheme will stay in existence and pay your deferred benefit or will wind up at some stage. If this wind up were to occur before you reach retirement age, it's possible that the transfer value payable on wind up may be reduced to a greater extent than any reduction currently applying. You will need to make a judgement call in this regard based on the information set out in the documents mentioned in Steven's blog.
 
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Thank you both for your helpful replies.

Regarding the error on my annual pension statement – Homer – your second paragraph sums it up nicely. That is exactly my current predicament. I wouldn’t have considered taking redundancy had I known that my pension at 60 was nothing like indicated on my annual pension statement. I did speak with my pension provider by phone before making the redundancy decision and they talked me through my pension figures (quoting the figures from my 2012 pension statement at the time as it was the one they had to hand and they quoted me a figure of 22,139). I assume this conversation is on tape. Also on my personal details on the statement under 'current part time rate' they have put 50% so I assume this is a reference to my job-share position.

Where do I start if I want to appeal this? Should I contact the Pensions Ombudsman? I continue to await a call from the pension provider.
 
The Ombudsman can only deal with matters of maladministration or misappropriation of funds and your case doesn't really come under either of those headings. In any case, you would have to go through an Internal Disputes Resolution procedure before you could refer the matter to the Ombudsman.

It's a difficult situation as it may be hard to prove that you would not have made the decision to accept redundancy if you had been aware of your correct pension entitlement. As you say, your conversation with the provider may have been recorded and this may help to prove that you were misinformed.

At the very least, it looks as if there was a failure to provide accurate information under the disclosure regulations when your annual benefit statements were being prepared. This would be in breach of the Pensions Act and could be disclosed to the Pensions Authority. What I suggest is that you contact the pension provider again and say that you will have no choice but to report the matter to the Pensions Authority if they don't respond to you within (say) a week. This may put the skids under them.

If they don't respond within the specified timescale, I recommend that you contact the Pensions Authority and explain the situation to them and ask them to suggest what you should do next.
 
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