A catch up job that got me thinking

Topic:

Hot topic

Date published:

Thursday, 7 January 2021

Author:

Gillian Graham

In the past, when you worked between Christmas and New Year you would often go into the office and have a bit of a clear out. It was the time you realised there were things you hadn’t looked at for ages and no-one had followed up on, so they could be filed or binned leaving the desk clear for the new year to come. Then you’d probably land up at the pub for a long lunch with the few colleagues also in the office, possibly checking out the sales in the shops enroute back to look at your emails one last time. Job done.

Those were the days!

Last year, I found there was really no escaping a job that had been sitting on my ‘to do’ list for well over a year – a bad admission for a pension scheme secretary, but there were good reasons! The task in question was to write a short member guide for a defined benefit (DB) pension scheme. With most DB schemes closed to future accrual for quite some time now, across the industry, we haven’t seen much need to update DB member booklets. However, there are still a lot of people with deferred pensions in DB schemes.

The guide I produced was aimed at these members, so it simply laid out how the pension they had built up in the scheme would increase in deferment, the options open to them for drawing that pension, the alternative transfer value option and benefits on death prior to drawing the pension. It will just be given to those members who request a booklet, but it would no doubt also be useful for a member’s independent financial adviser (IFA) when a transfer value is requested. Easy to provide as a soft copy or run off the printer as and when a hard copy is required.

Nothing earth shattering, but it did make me look at the actual benefits payable. I realised, although DB schemes are generally pretty generous and a ‘good thing’, they really don’t work out so well if you die in deferment! Happily, most people are living longer and death in deferment doesn’t happen regularly but I’m not sure many deferred members would be aware of the different value of benefits for their dependants.

For many DB schemes only a fairly miserly pension is payable to a deferred member’s spouse, although many would also grant a discretionary pension to another dependant in the absence of a spouse. For some members with no spouse, the only benefit payable could simply be a refund of member contributions.

This made me appreciate there are very good reasons for a member to transfer out of a DB pension scheme in certain circumstances. It also highlighted the importance of members having access to good financial advice (or at least clear guidance) – but that’s a task for another day. In the meantime, at least we now have an up to date member guide!

Back to opinions