Buyout FAQs

The following questions have arisen as a result of the Plan leaving PPF assessment and member benefits having been secured in a number of different ways

 

QB-1 Why has my Transfer Value changed?
The Trustee was able to secure terms with L&G in September 2018 that were more favourable than those available in either the December 2017 or subsequent estimates. In other words, the amount needed to buy a particular pension was lower. This resulted in improved pensions being secured for many members, as the reduction in cost was redistributed to those who suffered PPF cutbacks. As you will have seen in your ‘discharge’ letter, we are now covering 34% of cutbacks rather than the 24% that was used in the March Option letter.

However, as the transfer value equals the estimated cost of buying the alternative pension, final transfer values were typically lower than those estimated in May 2018. This is because for members taking transfer values the fall in buyout cost was not fully offset by the redistribution.

Please also take a look at our original FAQ 9-13 which can be found in the Archive FAQ section of our website.

QB-2 Can you explain the purpose of the ‘Percentage of standard/protected LTA used’ box on the P60 that I have just received from Nortel Networks L & G. Mine is blank but a former colleague of mine who retired recently says his contains a figure?
If you retired (i.e. first put your Nortel pension into payment) before April 6, 2006 then in most circumstances this box will be blank. This is because it is related to new tax regulations that came into force in April 2006 and which included the concept of a Lifetime Allowance (LTA) for pensions. The Pensions Advisory Service has a webpage explaining LTA which can be accessed by following this link TPAS Lifetime Allowance.

If a member retired after April 5, 2006 then they would have received notification of the percentage of LTA used and this figure would appear on all subsequent P60s. It will not change unless the member receives an additional pension from Nortel or ongoing increases to the existing pension exceed certain limits. If there is an additional pension or increases exceed the limits then the member will be notified and the box on the P60 will show the total percentage of LTA (original + new) then used.

For members who retired before April 6, 2006, we mentioned that in most circumstances the P60 box will be blank. However, if such a member receives an additional Nortel pension and/or increases exceeding the limits after April 2006 then they will be notified of the amount of new LTA used at that time. This same percentage will appear on subsequent P60s but it will NOT include an amount relating to the member’s original pension that was drawn before April 6, 2006.  If a member subsequently puts a pension from another provider into payment then they will usually be asked to confirm that they have enough unused LTA available, and for that they will need to take into account both their Nortel P60 percentage, if they have one, and the original pension which they will have to value using guidance issued by HMRC – please follow this link to the relevant part of the Pensions Tax Manual.  Take a look at  ‘Calculating the capital value of the pre-commencement pension’ where you will see a short description and an example.