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 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.
- QB-2 I have received a letter from Legal & General (L&G) saying that they have taken over responsibility for paying my pension but the website says that Willis Towers Watson (WTW) is still providing admin services to the Trustee. Can you please explain exactly what each party is responsible for?
- For many years, WTW has provided services to the Trustee for the payment of pensions and day to day administration of the Nortel Networks UK Pension Plan (Plan) and WTW continues to provide services to the Trustee in relation to benefits under the Plan. The letter which you received relates to the services which WTW separately provided to L&G.
In October 2018, the Trustee purchased insured benefits for most members from L&G (2018 Benefits). This purchase was based on available Plan funds in October 2018. In March 2019, L&G issued a policy document to members with 2018 Benefits that included details of those benefits.
L&G is responsible for providing the 2018 Benefits (and the Trustee is not).
For a transitional period following the Trustee’s purchase of the 2018 Benefits, L&G decided to use the services of WTW to administer the 2018 Benefits. In administering the 2018 Benefits, WTW was acting as a service provider to L&G (i.e. not the Trustee).
This transitional arrangement ended recently, which is why all members (for whom L&G provide 2018 Benefits) received a letter notifying them that administration was being moved from WTW to L&G with effect from March 1 2020.
Since the purchase of the 2018 Benefits, the Trustee has continued to receive further recoveries from the global Nortel insolvency procedures and certain members will have received a letter from the Trustee dated December 2019 giving information about the process for securing additional benefits, which we currently plan to secure later in 2020. The administration associated with this activity will continue to be provided to the Trustee by WTW and the management and investment of funds resulting from further recoveries remains the responsibility of the Trustee. The Trustee will continue to work with WTW until all Plan funds have been distributed. For many members, this will result in the Trustee purchasing additional insured benefits for the member from L&G. The administration of these additional insured benefits will also become the responsibility of L&G (and not the Trustee).
Once all Plan funds have been distributed, the Trustee company will be wound up.
- QB-3 Where can I find out more about the Lifetime Allowance (LTA)?
- The Lifetime Allowance is a tax limit set by the Government. If the total value of the benefits you receive from all your pension schemes (excluding the State Pension) go above this limit, you may have to pay extra tax.
You can find out more about the Lifetime Allowance by visiting the Lifetime allowance for pension savings page on the Money Advice website.
- QB-4 I want to transfer my benefits to a qualifying recognised overseas pension scheme; how do I complete the ‘Lifetime allowance on overseas transfer statement’ as referred to in my transfer paperwork?
- Please follow this link to the Lifetime allowance help sheet for overseas transfers for full information.
- QB-5 I know that my additional pension amount is only an estimate, but how secure are the additional funds you hold and could their amounts and what they can buy from L&G be significantly impacted by further market turbulence?
- The Plan’s assets are held in cash and government securities, so they were not exposed to the recent falls in share prices.
- The additional pension will be secured for you based on insurer pricing, the additional funds recovered and market conditions closer to when it is secured. Therefore, the final amount could be higher or lower than the estimates provided, even though the Plan assets are invested similarly to how an insurer would invest.
- QB-6 I have mislaid my copy of the Glossary provided with my March 2020 letter. Can you provide a link to this document on your website?
- Please follow this link to the March 2020 Glossary