Pensions scandal

[Dennis]

Let me put my cards firmly on the table. I work in the financial services industry so I have an interest in the subject of pensions – but I am not attempting to sell anything to anyone. This thread is purely for information.

Something we all have in common on this forum is that we have diabetes. Many of us are in the 50 to 65 age group, and that is indeed the age at which most people are diagnosed with diabetes. A number of our regular contributors are Type-1, but are also in an age-group where retirement is not going to be all that far away.

The second thing we have in common is that we won’t be able to live on the state pension and will need additional income to see us through retirement. Many of us will have been saving towards retirement through contributions to private or company pension schemes.

The third thing we have in common is that we all qualify for a far higher pension than our private or company scheme will pay out. And I am not talking a few pounds, but thousands. If you have diabetes you are entitled to what is termed an “enhanced” pension which could be as much as 40% higher than a standard pension. If you also have other problems, as many of us tend to as we get older (such as high blood pressure, high cholesterol, angina, thyroid problems, retinopathy, neuropathy, etc), then each of these qualifies you in its own right to a higher or "enhanced" pension. If you have more serious problems then you will probably qualify for an "impaired" pension that could, depending on how serious the condition is, result in a pension of more than double what most pension companies will pay you.

The problem is that most people are not aware of this, and many of the few that are aware don’t know what they need to do to improve their pension situation. And that is the purpose of this thread – my aim is to try to make people aware of what they are entitled to and how they can get their hands on the thousands of pounds per year that they will be throwing away through not having an enhanced pension. Its not a case if "if you have diabetes then you might qualify" - everyone who is saving for a pension and has diabetes qualifies.

As I said up front, I am not in the business of selling you anything – in fact I will not even divulge who I work for. But I do feel very strongly that many (in fact most) pensions companies effectively cheat their pension savers by not making it clear what their entitlements are at retirement. Many company schemes are equally guilty of this. My intention is to make sure that at least all our forum readers are aware of their rights and will not get cheated out of retirement income.

At this stage I am not going to go any further until I have had a chance to gauge reaction to the subject. If you are interested and want to hear more, then please say so and I will explain further or answer any questions. If you are not interested then I will shut up . . . but don’t complain in a few years that the bloke next door has diabetes just like you but its not fair that he gets twice as much pension as you do!!

In case anyone wants to know what my qualifications are on the subject - I am not a registered IFA (Independent Financial Advisor) with the Financial Services Authority. Which is why I would never attempt to sell you anything or advise you to buy a particular product. But I have been in the financial services industry for more than 30 years and I train IFAs on pension services!

 

[stuartclose]

Dennis

your mail about the pension appeals to me, I am 62 so of pensionable age already and because of various events I am only entitled to about £57.00 pension per year, so will go onto Sharing Pensions co.uk and see whats what.

regards, Pauline

 

[Dennis]

Pauline,
If the £57 you referred to is a state pension then nothing will change that (apart from possibly being able to buy additional years). The pension enhancements for diabetics that I am referring to are non-state pensions.

 

[TROUBR]

Dennis
I am 38 so hopefully will not need to deal with this just yet but I did want to ask (as I understand very little about these things) I am on a final salary scheme, will I benefit from any extra allowances?
Also if I changed job (I may be made redundant in the next few years as my department is moving to Manchester and I would rather stay south) would I be best to transfer the final salary pension over to something else?
Thanks heaps

 

[bonerp]

So Dennis - just for everyones clarity, having an ailment that qualifies you will allow you to CONTRIBUTE more to a pension that standard schemes allow, therefore enhancing your investment - is this what you are saying?

I cant imagine a 'normal' (scuse the term!) person would contribute, say £50 per month and at retirement their pension is worth £100 per month back, compared to a 'lucky' diabetic being entitled to £120 per month based on the same contribution?!?!

Paul :wink:

 

[Dennis]

So Dennis - just for everyones clarity, having an ailment that qualifies you will allow you to CONTRIBUTE more to a pension that standard schemes allow, therefore enhancing your investment - is this what you are saying?

Absolutely NO EXTRA CONTRIBUTIONS. Having diabetes results in the actuarial profession estimating that you have a lower life expectancy than a "normal" person. So where the contributions of a "normal" one will qualify them for a pension of, say £100 a month, the diabetic with exactly the same contributions can get a higher pension - the important thing being that you pay no more to get this. But you need to know how to go about getting it.

I cant imagine a 'normal' (scuse the term!) person would contribute, say £50 per month and at retirement their pension is worth £100 per month back, compared to a 'lucky' diabetic being entitled to £120 per month based on the same contribution?!?! Paul :wink:

Tht's exactly how it works. As explained above, just about the only benefits that we diabetics get over and above the non-diabetics (apart from the joys of finger pricking and arguing about carbs) is a higher pension payout but for no extra cost to us.

The fact that this is so little appreciated outside of the pension industry, and all the big pensions companies would prefer that it stays that way, is why I titled the thread a "Pensions Scandal".

 

[sixfoot]

Dennis would your scenario include anyone taking a redundacy package which included their company pension ?

Dave P

 

[Dennis]

I am on a final salary scheme, will I benefit from any extra allowances?
Also if I changed job (I may be made redundant in the next few years as my department is moving to Manchester and I would rather stay south) would I be best to transfer the final salary pension over to something else?

Hi Louise,
You are very lucky if you are on a final salary scheme as so few employers other than central and local government offer them nowadays. No, a final salary scheme has a contractual amount that will be paid as a pension and that doesn't vary as a result of your health. By contrast the value of pension that you would get from a "defined contribution" scheme (all personal pensions and most company pensions these days) is not determined until the day you retire, so can be influenced by your health, life expectancy, etc, at that time.

In most cases you are better leaving a final salary pension pot where it is when you change jobs and simply start a new pension with your new employer. It would be very unlikely that a new employer would also offer a final salary scheme, so you could end up transferring your pension into a scheme where it would pay out a much lower amount at retirement than it would do if just left in situ. Much will depend on what the terms and conditions are of your current scheme and ideally you should seek advice from an IFA on your specific circumstances, if and when a job change arises. For a first consultation and advice such as you would need, most would not charge.

Incidentally, if you don't have an IFA that you know and trust, then a good tip is to go to a local building society and ask which of the local IFAs would they recommend - they always know the best ones! Don't ask a bank though - they have their own "financial advisors" who are not regulated, not independent and are not even qualified to give advice - their only job is to sell you that bank's products.

 

[Dennis]

Dennis would your scenario include anyone taking a redundacy package which included their company pension ?

Dave,
Could you explain a bit more what you mean by a redundancy package that includes your pension?

 

[ChocFish]

Dennis, what is the situation for someone who is already retired, is it too late for them to claim for this now? What should they do?
Thank you for your help and advice.
All the best
Karen

 

[Dennis]

Hi Karen,
If you have already converted pension savings into an annuity then it is too late to change it. This is why it is so important to know what is available to you before you decide on an annuity. Once you have bought an annuity there's no going back if you later find you could have got a better one.

If your pension "pot" or fund was not used to buy an annuity, but is instead being used to top up your income (called income drawdown) then it is not too late because the remainder of your pension fund is still intact and when you eventually use it to buy an annuity then you can get an enhanced annuity with the money.

 

[Thirsty]

Dennis, just to clarify things, I think what you're saying is that when one decides to begin taking benefits from a private pension scheme, it's important to shop around for the best annuity available, making sure that the issuing company is aware of any health problems likely to lead to a relatively early death.

Correct?

 

[The Governor]

I'm on a final salary scheme, but I do have very small private pensions dotted around from previous employments.

I think you're saying that when the time comes for me to start drawing my pension I need to remember to opt for the enhanced one, but in the meantime (next 30 years or so) I need do nothing?

The good news - we get more money

The bad news - we're all gonna die sooner

 

[Dennis]

Thirsty,
Spot on. It's worth remembering that when you invest in a pension the company that takes your money is usually not the best one to buy an annuity from. It's a bit of a generalisation, but in most cases the best pension companies offer the worst annuity rates.

There are a few of the bigger pension companies that offer what they call enhanced rates. But these nearly always pay just a small amount more than their standard annuity would. There are companies that are annuity specialists and offer much higher rates for enhanced and impaired pensions but they are are not companies that you could approach directly to get a quote from because they deal only through IFAs. If you shop around then always do it through an IFA - yes the IFA gets paid commission but you can still end up far better off than you would by approaching one of the companies that will deal direct with the public.

 

[Dennis]

I think you're saying that when the time comes for me to start drawing my pension I need to remember to opt for the enhanced one, but in the meantime (next 30 years or so) I need do nothing?

The good news - we get more money

The bad news - we're all gonna die sooner

Hi Gov,
With the final salary pension you will only get whatever percentage of your final salary the scheme is designed to pay out. But for the other pensions, yes, I couldn't have put it better.

PS its only the actuaries who reckon we are going to die sooner.
You and me know we are going to live forever.

 

[bonerp]

I'm lost - and I work in Pensions lol!

So its not when I take out a pension at 37 I need to tell them and get an enhanced rate (and how would I say this?), but its when the pension comes to pay and it turns into an annuity???

Sorry!

Paul

 

[Dennis]

Hi Paul,
That's correct. When you are paying contributions into a pension fund, that fund will be invested and grow in value just like anything else you would save in. Whether you are diabetic or not makes no difference at that stage because the rate that your pension fund grows is limited by what interest the fund can earn.

It is only when you come to cash the pension fund in and buy an annuity that your being diabetic comes into the picture. Because diabetes is regarded as a chronic illness, it will shorten your life expectancy. By how much will depend on a lot of factors (like whether type-1 or type-2, how many meds you need to take, how well controlled is your BG, how long you have been diagnosed, what other complications you may have). All of these factors are taken into account in calculating how much extra annuity you will get.

As I mentioned in an earlier post, the big pensions/insurance companies may offer a slightly increased rate if you tell them that you have diabetes, but it is the smaller specialist annuity providers who pay the highest rates - and higher by a very long way. Unless you happen to work for one of the enhanced annuity specialists, ask the actuaries where you work what they think of enhanced annuities and they will probably tell you not to utter profanities in their presence! The big boys make their profits from the fact that they are paying out the same pension whether you have a chronic illness or are as fit as a fiddle.

 

[sugarless sue]

I wish I had one of those private pensions.No matter how long I work for this company I will get sweet...nothing at the end of it.I've been there 17 years but will have to do with the state pension.Should have taken out a pension when I first started but did not think the job would last long! I made sure my kids did not make the same mistake though.they all pay into a private pension.

 

[bonerp]

Thanks Dennis - worth knowing - even if I'll have to rememer it for another 25 years lol!!
May well help someone now so top draw old fella!
Cheers
Paul

 

[TROUBR]

Thanks for the advise Dennis. I am only in a final salary scheme because I have worked for the same corporation for 20 years (ahhh I was 18 when I started how depressing is that) Thanksfully although they have made a lot of changes and have bought in a new scheme for new joiners they have agreed to leave us old timers alone. Mind you who know how long that will last!