Final Salary Pension

[Webbo1981]

Hi

 

I have got a Final Salary Pension with my current employer which I have had since when I started back in September 2001

 

I am currently ill off work where I have been since Feb 2012

 

After long discussions with my employer they have kindly offered me the chance of voluntary redudancy/compromise agreement instead of Dismissal, this will happen Feb 2013

 

May I ask what will happen with my pension? Or what should I do?

 

Just to note I wont be returning to work in the near future due to my illness

 

Any help would be much appreciated

[MikeBes]

I think you will find it will be frozen until you are eligible to draw it usually 55 but at reduced rate until you reach normal retirement age.

[Webbo1981]

I think you will find it will be frozen until you are eligible to draw it usually 55 but at reduced rate until you reach normal retirement age.

 

Ok many thanks, I assume I do nothng for now then

[dw1552]

You could also enquire with the company about ill health early retirement instead of redundancy/compromise agreement.

[MikeBes]

You should still recieve a pension update each year from your employers pension administrator. But yes not much you can do for know unless you are over 55.

[Webbo1981]

You could also enquire with the company about ill health early retirement instead of redundancy/compromise agreement.

 

Thanks for reply, sorry as I am a novice but what is Ill Health Retirement? I appreciate the title suggests what it is but how would this work? Also would it work out financially better for me taking this route rather than redundancy?

 

Thank you in advance

[marmaris30]

Ill health retirement usually involves the employee retiring immediately, qualifying them to start drawing a pension immediately. Instead of making a redundancy payment directly to you, they make an age-related payment into the pension fund, which helps to counteract the fact that it would have to be significantly reduced.

 

Unless you are approaching pension age anyway, the payment they'd have to make into the pension fund would normally be much more than they'd give you in redundancy, so they'd need to be feeling generous to offer it.

[dw1552]

It is an option if you are unlikely to be able to work again and there is no age restriction as to when it can be paid. As for any financial advantage I could not say but I would be very careful how any agreement is worded as voluntary redundancy you are making yourself unemployed and that could have implications for any benefits you may be able to claim in the future.

[honeybee13]

Hello there.

 

To follow on from what Marmaris says, my understanding is that some final salary schemes will only pay an early pension to someone who is not going to work again. You've said that you're not likely to return soon, but you haven't said never.

 

It might be worth checking the rules of the scheme.

 

My best, HB

[Webbo1981]

All thank you for your responses as this helps

 

I am now concerned I will struggle for benefits in the future if made redundant. Either way thank you for your help

 

Regards

[ericsbrother]

Your pension scheme rules will have a section in it about retiremnt due to permanent ill-health or incapacity.

 

This normally allows you to take a full pension if you are incapable of working defore your normal pensionable age.

 

Some schemes specify that this incpacity is for disharging your normal duties and others say ANY work.

 

You should determine if you fulfill this criteria of permanancy and apply via your employer to the scheme trustees.

 

You will then usually undergo a medical assessment by a doctor appointed by the scheme or an independent specialist.

 

If you meet the criteria you will leave your employment and receive a pension equal to that you would have received assuming you had worked up untol your normal retirement age

and it will be paid immediately.

 

If you do not meet the criteia for ill-health retirement your employer shouldnt make you redundant as that is Disability Discrimination and they know it.

You cannot be treated less favourably than anyone else.

 

I suspect they ahve used the wording as interchangable with a compromise agreement when it is not.

The compromise agreement is basically paying you to go away without any admission of fault from either you or the employer.

this is popular with employers who have failed to manage someones ill health properly in the early stages

and would now be open to a claim of unfair dismissal on disability grounds where the potential damages are unlimited.

 

It basically lets you go with a pay-off and you dont sue them but the post is still available.

 

Redundancy would require proof that your job no longer exists due to 1 of several reasons and thus you cannot be replaced.

If you are made redundant you may be eligible to take your pension early depending on the scheme rules and your age (over 55).

 

The employer would have to pay extra in to make up the actuarial strain of the pension scheme so they wont be keen on this if you can take retirement benefits.

 

Alternatively they can sack you on capability grounds and risk an unfair dismissal for Disanbility Discrimination claim from you.

 

If you take the money from a compromise or redundancy and dont qualify for an immediate pension your pension will be effectively frozen until you reach your scheme's normal retirement age.

 

I would speak to your personnel/HR dept and ask them to consider the ill-health route first

and then make noises about disability discrimination and see what they offer as a settlement.

 

If you are old enough to take an early pension then I would recommend it unless the scheme prohibits you from working in the future

-many prohibit working in the same field-

ie teachers cant retire for any reason and then do supply teaching but can do other work that is not pensionable.

 

They are obviously willing to pay you something to avoid a fuss so make sure that what they offer is enough to make it worthwhile to you.

 

Bear in mind that if it all goes wrong you can have your day in an employment tribunal but there is no guarantee of success

unless you have certain illnesses that automatically qualify.

 

Average payout for DD in these cases is £11k so not enough to keep you for the rest of your life.

 

I wish you the best for your future and let me know how you progress.

I retired on ill-health grounds and 5 years later I am still battling for the correct pension entitlement.

Luckily I have other income and no debt.