Pension Reduction Warning
As some of you will know, those who served before 1980 and are drawing their service pension will have a service pension reduction when they reach state pension age. I was not aware of this and so it came as a surprise that my pension was being reduced by £741. I telephoned Equinity Pay Master to ask why and was told that it was because I had reached state pension age and it was to do with NI contributions made while serving between 1948 and 1980 (I joined in 1976). Bugger, I thought and put it down to sods' law. However, during a boring period in my new employment I decided to do some research. I discovered that there are 2 ways in which your pension can be reduced at state pension age, One was for service prior to 1975 (which didn't apply to me and was ignored) and the other was: are you ready for this? A reduction based on 87.03 p for each year of service prior to 1980, which in my case came to £2.61. To further complicate the issue, this new sum (£2.61 in my case) is quietly increased by inflation (more or less) for each year that you draw your service pension prior to state pension age. For me this complex arrangement meant that I should expect a pension reduction of about £4 not the £741 that had been made.
Are you still with me? I called Equinity again and asked for an explanation and a copy of the mathematics that they had used to arrive at their figure. They correctly explained that the calculations are carried out by the Pensions folk and they simply pay out what they have been told to. They raised a query and passed my problem to the Pensions folk. A week later I received a call from the Pensions folk The very helpful chap agreed that the £4 figure was correct and couldn't understand where the £741 had come from. He passed this information back to Equinity and told me that they were raising the issue to senior level and that they would get back to me.
A very nice lady from Equinity called me shortly afterwards and explained that there had been a keying in error and that my reduction should have been £4 and not £741. She assured me that this was simple human error and not a software glitch.
Throughout this adventure everyone I have spoken to have been extremely helpful and cooperative, but the lesson is, I think, clear. Check the figures that Equinity send, they are only human and can make mistakes. I'm glad I checked - I'm £737 better off than I would have been had I accepted my lot (minus tax, of course).
By the way, next year I'm looking forward to a less than inflation increase in my service pension due to the Government Minimum Pension rules. Enjoy Googling that one.