Unfairness of Life Time Allowance for Defined Contribution (DC) compared to a Defined Benefit (DB) Pension schemes regarding the amount of pension it allowes a person to have. (Lower for DC scheme.)

C. Thompson made this Freedom of Information request to Her Majesty's Treasury

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

The request was successful.

Dear Her Majesty’s Treasury,

I have been looking at information on the internet about the lifetime allowance (LTA)of £1,250,000 and have come to the conclusion that it is unfair to people in DC pension schemes as it will only allow them to have a pension of about £41,000 based on open market annuity rates for a man aged 65 with a wife two years younger reducing to 50% having cost of living increases. Where under a defined benefit pension scheme he would be allowed to have a pension of £62,500 using the factor of 20:1 The factor of 20:1 is allowed no matter what a persons age is and allows a DB scheme to have a pension roughly 50% higher than under a DC scheme.

1) Can you tell me if this was mentioned to you by any other government dept or organisation and if so please let me have copies of any correspondence.

2) GAD mentioned on their web site that they coud have come up with a factor of 23:1 for a person aged 60 using the same basis of uprating as they did to increase the factor of 10:1 to 16:1 for the Annual Allowance (AA)or 22.21 at aged 60.

They went on to say that it could have been 32:1 at aged 60 using rates on the open Market.

A) Was this brought to your attention.

B)If it was, did you discus with GAD the the implications regarding the difference in pension it would allow under DC and DB schemes.

c)Did you discus with GAD what rate you should use to convert pension to LTA of £1,250,000.

Can I have copies of any internal correspondence, correspondence with GAD and any other organisation regarding the points I have raised.

Yours faithfully,

C. Thompson

Enquiries, CEU - HMT [Restricted], Her Majesty's Treasury

Dear C Thompson,
Thank you for your Freedom of Information request. I write to confirm receipt of your request and to let you know that it is receiving attention. If you have any enquiries regarding your request do not hesitate to contact me.
Ryan Holmes.
Correspondence and FOI Support Officer,
HM Treasury.

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Dear Enquiries, CEU - HMT [Restricted],

Are you yet in a position to answer my letter as it is now late and you should have replied by 8 February 2013.

Yours sincerely,

C. Thompson

responses, FOI - HMT [Restricted], Her Majesty's Treasury

1 Attachment

Please find attached our response to your recent enquiry.

HM Treasury | Information Rights Unit |1 Horse Guards Road | SW1A 2HQ
www.hm-treasury.gov.uk

 

 

 

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Enquiries, CEU - HMT [Restricted], Her Majesty's Treasury

Hello Sir/Madam,

Thank you for your email. I have checked the database and the 20 day deadline expires today. Therefore you will be receiving your reply, so time today.

Kind Regards,
Correspondence and Information Rights Team | Corporate Centre Group | 2nd Floor Blue Zone | HM Treasury, 1 Horse Guards Rd, London, SW1A 2HQ | Please consider the environment before printing this email.
www.hm-treasury.gov.uk

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Dear Enquiries, CEU - HMT [Restricted],

I am happy not to receive the information but still think you are not treating DC schemes fairly compared to DB schemes due to a DB scheme allowing a person to have a maximum pension roughly 50 % higher than a person with a DC scheme.

I can understand the reason you don't wan't to increase the multiple of 20 to reflect true value as it could make taking a lump sum very expensive to the DB pension fund and very favourable to the employee.

Is there any reason why the restriction on Life Time Allowance instead of being value of fund to restrict benefit could not be changed to pension say £50,000 pa then people in DB and DC schemes would be treated equally and you would not have to change the factor of 20.

It seems to me as if you have got yourselves into a problem as you can't put up the factor of 20 without increasing the cash sum paid out to public service schemes for commutation. I assume because of this you are greatly under valuing the benefits of public service pension schemes by about 50% and true cost of running them to the tax payer.

Is this correct?

Yours sincerely,

C. Thompson

Dear Enquiries, CEU - HMT [Restricted],

I wrote a letter to you on 11 February 2013 asking you if there was anyway that the Lifetime Allowance could be based on a pension figure rather than a lump sum of £1,250,000 so that DB and DC schemes could be treated equally. You did not answer this.

Can you treat this as a new freedom of information request and also tell me if it was ever discussed to base the Lifetime Allowance on a pension figure rather than a cash value. Did your office bring it to the attention of the Government that DB schemes would be entitled to a pension which is roughly 50% more than a DC scheme.

Yours sincerely,

C. Thompson

Enquiries, CEU - HMT [Restricted], Her Majesty's Treasury

Dear Sir/Madam

Thank you for your Freedom of Information request. I write to confirm receipt of your request and to let you know that it is receiving attention. If you have any enquiries regarding your request do not hesitate to contact us.

Regards

Heather May Lewinson
Correspondence and Information Rights Team Her Majesty's Treasury

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responses, FOI - HMT [Restricted], Her Majesty's Treasury

1 Attachment

Dear C Thompson

 

Please find attached response to your FoI request.

 

Information Rights

 

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