Home Money A pension transfer I made in 2006 was short by £38k but I’m only being offered £5k back now: Steve Webb replies

A pension transfer I made in 2006 was short by £38k but I’m only being offered £5k back now: Steve Webb replies

by Elijah
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Disappointed? My pension transfer was undervalued by a significant sum, so why are they offering me such a small refund?

Disappointed? My pension transfer was undervalued by a significant sum, so why are they offering me such a small refund?

Last summer I was contacted by a pension administration company acting on behalf of a major pension provider.

When my occupational pension was transferred from this provider to another in 2006, there was an underpayment on the new pension of £38,000.

This underpayment was identified following a High Court ruling regarding the inequality of the Guaranteed Minimum Pension.

I was offered around £5,000 (1 per cent interest) to pay in cash (taxable) or into a pension scheme.

The pension administrator has bombarded me with emails and letters to accept the money offered.

I have complained to them about this high pressure approach.

I am not satisfied with the sum offered. I believe that 17 years of investment in a managed pension scheme would have provided much more than the sum offered.

This is important to me because I am now 60 years old and looking to collect my pension.

I raised the matter with the management company but they told me that they are just the management agents and have no power to act on my complaint.

They have raised the matter with the trustees of my former pension provider but the trustees have never contacted me regarding this matter.

Can you offer me some guidance on how I can escalate this matter and get a resolution?

SCROLL DOWN TO FIND OUT HOW TO ASK STEVE HIS PENSION QUESTION

Steve Webb responds: When you left your old pension scheme, the amount you were offered as a transfer value reflected the cost of providing the pension to which you were entitled under the rules of that scheme.

Many years later, a court ruling means that if he had remained in that scheme, he would have received a larger pension than was expected at the time.

The question is what remedy should I receive now.

Do you have a question for Steve Webb? Scroll down to find out how to contact you.

Do you have a question for Steve Webb? Scroll down to find out how to contact you.

Why are you being offered £5,000 for an old pension transfer?

The court ruling we are talking about refers to traditional salary-related (defined benefit) pension plans.

Most such plans reached an agreement with the government known as “outsourcing.”

In return for the employer and employee paying a reduced (‘outsourced’) rate of National Insurance contributions, the scheme had to promise to pay a pension at retirement as good as that which the state pension scheme would have provided. related to income (SERPS). .

This payment was known as the Guaranteed Minimum Pension and these rules applied between 1978 and 1997.

One of the strange things about GMP is that the obligation to pay it only reduces at state pension age, which is different for men and women.

This could result in the occupational pension scheme paying different amounts to different workers based solely on their sex.

In 1990, a court ruling ruled that plans must pay men and women the same. Since then, there has been much dispute in the pensions world about whether this applied to GMPs.

However, a series of relatively recent court cases have confirmed that pension schemes *must* equalize the effects of GMP, to ensure that people are not favored by their occupational pension scheme simply because they are men or women.

Both men and women have lost out depending on the circumstances. In many cases, the adjustments needed are very small, but in some cases (like yours) they can be quite substantial.

and a November 2020 court ruling specifically ruled that the values ​​of previous pension transfers should also be reviewed to verify the effects of this ruling.

STEVE WEBB ANSWERS YOUR QUESTIONS ABOUT PENSIONS

How does this affect your offering now?

From what you have told me, it seems accepted that if your first pension scheme had known at the time that it would have to follow these rules, it would have offered you around £38,000 extra on top of the value of your transfer.

But what you mean is that if that extra amount had been put into your target pension scheme in 2006, by now it would have generated much more than the payment of around £5,000 that you were offered, and that is almost certainly TRUE.

I have examined the court’s judgment and can see (at paragraph 263) that the judge in the case considered this exact point.

In principle, the judge accepted that, in order to put him in exactly the same situation as he would find himself in if the rules in force at that time had been applied, it would be necessary to calculate the refund he had stopped receiving.

But the judge said working this out for each individual, taking into account each target scheme’s investment strategy, would be a huge and complex task.

As I mentioned above, many of these payments in respect of GMP equalization are very small, and the judge said that in some cases it could cost more money to pay an expert to do all the calculations than the amount of the repair payment.

He therefore decided that an approximate method was needed and ordered that interest from the time the transfer was made be based on the Bank of England base rate plus 1 per cent.

He said this approach was “well used and well understood” and would provide “administrative simplicity”.

Since the judge has indicated how this process should work, unfortunately I don’t think there is any obvious way to challenge this.

Although I am concerned that you feel you are being pressured by the plan administrators, as long as they have done the math correctly, it would appear that they are acting in accordance with the court ruling in this case.

Ask Steve Webb a question about pensions

Former Pensions Minister Steve Webb is This Is Money’s agony uncle.

He’s ready to answer your questions, whether you’re still saving, in the process of quitting working, or juggling your finances in retirement.

Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuarial and consultancy firm Lane Clark & ​​Peacock.

If you would like to ask Steve a question about pensions, email him at pensionquestions@thisismoney.co.uk.

Steve will do his best to respond to your message in a future column, but will not be able to respond to everyone or correspond privately with readers. Nothing in his answers constitutes regulated financial advice. Posted questions are sometimes edited for brevity or other reasons.

Please include a daytime contact number with your message; This will be kept confidential and will not be used for marketing purposes.

If Steve can’t answer your question, you can also contact MoneyHelper, a government-backed organization that provides free pensions support to the public. can be found here and its number is 0800 011 3797.

steveWe receive many questions about state pension forecasts and COPE (the outsourced pension equivalent). If you write to Steve about this topic, he answers a typical reader question about COPE and the state pension here.

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