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?- Please contact L&G directly on 0345 766 0813 if you need further information about figures on your P60.
- QB-2 This question has been removed since it is no longer relevant
- No longer applicable
- 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 This question has been removed since it is no longer relevant
- No longer applicable
- QB-5 This question has been removed since it is no longer relevant
- No longer applicable
- QB-6 This question has been removed since it is no longer relevant
- No longer applicable
- QB-7 I have received a letter telling me about my additional pension, which also tells me that I have used up additional Lifetime Allowance. What does this mean and what do I have to do now?
- Please follow this link to Additional LTA Information
- QB-8 What adjustments are needed to members’ benefits due to the outcome of the legal proceedings in Hughes v Pension Protection Fund (“Hughes”)?
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As a result of the Hughes case, there are two issues which we need to address – A) the removal of the PPF Compensation Cap and B) the obligation of the PPF (and the Trustee) to guarantee that benefits correspond to at least 50% of the value of a member’s accrued pension entitlement.
A) Compensation Cap
Legislation previously provided that the PPF (and the Trustee) had to cap (restrict) the compensation payable to members upon retirement to an amount calculated in accordance with the relevant legislation. The Hughes judgment determined that this cap was age discriminatory and directed that it must be removed.
Note that the compensation cap is different from the 10% reduction applied to the benefits of members who are under Normal Pension Age when a scheme enters PPF assessment, which was not removed by the Hughes judgment.
Where the cap has previously been applied in calculating the benefits in respect of a member; the member (or their dependants) should be aware of the fact that the cap has been applied to their benefits from previous communications from the Plan. The effect of the removal of the cap will be for pension benefits to be calculated on the basis it never applied. Therefore, affected members and dependants are due an increase (and, in some cases, an arrears payment). The Trustee’s obligations are now clear in respect of this cap removal, but the calculations are complex and will take time to implement. The Trustee is however considering options to implement this change materially ahead of the final distribution of Plan assets. We will communicate with relevant members once we understand likely timescales.
B) 50% Guarantee
The PPF is considering how to implement this element of the judgment. We too are working with our advisers to understand the impact on the Plan. Although we expect the 50% guarantee to directly impact a small minority of our members, the Trustee is anxious to get the remaining benefits to members as quickly as possible. However, it may still require a considerable amount of time to understand and then calculate the impact on members’ benefits. It is therefore likely this issue will be addressed as part of the final distribution of assets.
Please note that these issues relate to how the Plan’s remaining assets are to be allocated. Implementing the Hughes judgment will not require any reduction to benefits already secured.
- QB-9 Why is a review of some historical transfers out needed?
- The third judgment in the Lloyds court proceedings requires the Trustee to consider the position of members involved in transfers from the Plan since May 1990, where the transfer involved a “GMP”. A GMP is the Guaranteed Minimum Pension that the Plan had to provide as it was contracted out of the Additional State Pension from April 1978 to April 1997. The Trustee needs to consider whether the transfer values properly reflected the equal treatment of GMPs between the sexes where the GMP was earned after May 1990. In some cases, an additional payment may be due in respect of a person who has previously transferred out of the Plan.
Transfers out following the Plan’s exit from PPF assessment in 2018 are not within the scope of this review. Adjustments were already made to those transfer values to account for the inequalities caused by GMPs.