Deferred Pension issue (2024)

Dazed_and_C0nfused Posts: 14,335 Forumite

27 August at 11:54AM

Keiffy1964 said:

I have a deferred/preserved pension fund from employment that ended in March 2002. The pension matures when I'm 60 on 1st January 2025. I was constantly being told not to transfer the fund and when I was 55, I enquired about taking the tax free lump sum. Again I was told it wasn't a good idea and that I would lose out.
The preserved pension as at March 2002 was £1830 and in February this year I received a letter from the fund administrator stating that the pension had increased to £9134. I've subsequently been told that this figure was a clerical error and in fact the new preserved pension is only £3967. I'm still awaiting a response to me querying this. My question is, is an increase from £1830 to £3967 in 22 years acceptable? Does the fund only go up with inflation or is it invested in any way?

Your post is missing a key fact, and the way you have worded things only adds to the confusion.

Defined contribution pensions don't mature so this implies it's a defined benefit pension. Probably referred to as final salary pension in 2002.

But then you refer to a fund, which would be a defined contribution pension.

Which is it? One is a pot of money for you to take pretty much as you wish (DC). The other (DB) is a bit like deferred salary. You get a pension based on the scheme rules, there is no pot of money for you to dip into.

xylophone Posts: 44,995 Forumite

27 August at 12:07PM edited 27 August at 1:15PM

Are you female?

By the sounds of it, you were a member of a Defined Benefit Pension Scheme.

Do you have a copy of the Scheme Booklet"

When did you first become a member of this Scheme?

Were you given a statement of deferred benefits when you left the scheme?

If so, what exactly does it show?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Albermarle Posts: 23,581 Forumite

27 August at 12:28PM

My question is, is an increase from £1830 to £3967 in 22 years acceptable? Does the fund only go up with inflation or is it invested in any way?If it is a Defined Benefit ( DB) pension, which seems likely, then there is no fund as such.
You had a promise to pay you £1830 pa as a pension, and now it is £3967 pa, as it will have presumably increased with inflation, although the increase in pension is actually significantly more than 22 years of inflation, so that is good.

27 August at 12:37PM

Keiffy1964 said:

I have a deferred/preserved pension fund from employment that ended in March 2002. The pension matures when I'm 60 on 1st January 2025. I was constantly being told not to transfer the fund and when I was 55, I enquired about taking the tax free lump sum. Again I was told it wasn't a good idea and that I would lose out.
The preserved pension as at March 2002 was £1830 and in February this year I received a letter from the fund administrator stating that the pension had increased to £9134. I've subsequently been told that this figure was a clerical error and in fact the new preserved pension is only £3967. I'm still awaiting a response to me querying this. My question is, is an increase from £1830 to £3967 in 22 years acceptable? Does the fund only go up with inflation or is it invested in any way?

Who told you? This doesn't sound like informed financial advice, but more like mates down the pub or similar (who were probably right, albeit accidentally!).

In the absence of any other options, whether you think it is 'acceptable' or not isn't relevant; the pension is what it is, albeit with an unfortunate detour when your hopes were raised by an absurdly high figure given to you in error. If this is a defined benefit scheme, which sounds likely, the rules of the scheme will set out how it increases from the time you leave until you access your benefits - and it looks like a pretty good increase.

27 August at 1:09PM

when I was 55, I enquired about taking the tax free lump sum.

And if this pension is a deferred DB, then you would have had to take the income from the pension, as well as the tax-free lump sum.

At 55, this income would have been actuarily reduced, possibly by as much as 5% for each year it was taken early (ie before 60).

Waiting until you are 60 means you get the income the scheme rules say with no reduction. Going forward, this income will also be increased each year according to the scheme rules (frequently by inflation, capped at eg 3% or 5% maximum).

27 August at 2:14PM

FIREDreamer Posts: 481 Forumite

27 August at 5:57PM

molerat said:

Mar 2002 to Apr 2024 would give around a 1.9 multiplier for public service pensions which is £3477 so £3967 looks pretty good.

Any GMP deferred in March 2002 would be revalued at 6.25% per annum. For 22 years we get a multiplier of 3.8.

Most DB schemes were contracted out so some GMP element is likely?

xylophone Posts: 44,995 Forumite

27 August at 6:40PM

some GMP element is likely?

It will depend on when the OP joined the scheme.

If on or post 6/4/97, there will not be a GMP.

FIREDreamer Posts: 481 Forumite

27 August at 6:49PM

xylophone said:

some GMP element is likely?

It will depend on when the OP joined the scheme.

If on or post 6/4/97, there will not be a GMP.

Wow, didn’t realise GMP ended that long ago!