Defined Benefits Pension Calculation

[demolitionduo]

Can anyone with pension knowledge help please?

I have Defined Benefits/ Final Salary pension with a former employer which I joined in the late 80's. I have recently left work and received a letter detailing my pension and dates of accrual. However, the weekly hours and dates they stated I had worked them were incorrect by quite some margin.

It appears when I went part time when I had my family in early 2000, these reduced hours have been etched on my records going back to the date I joined the company. There is a considerable difference in the full time and part time hours I worked.

This isn't helped by the fact that the company I worked for was bought out twice during my period of employment and I suspect records have gone missing during this time.

I have been asked by the pension administrator to prove what hours I worked as my former employer believed the (wrong) info they had was correct.

Fortunately I had kept payslips and contracts pretty much from the start. I am awaiting their reply....4 weeks on!

It is however, the rough equivalent to not including 15 working hours a week over a 10 year period.

Does anyone have any idea what impact wrongly recorded hours of work would have on the actual final salary pension calculation?

Thank you.

That’s great that you’ve got the payslips!

No one can tell you how much the 15h per week for10 years are worth as it depends on the terms of the pension and how much you were paid etc. However, if I compare that to my teacher’s pension, that would be several thousand a year difference in retirement.

So I’d definitely, definitely fight for the corrections.

I don't think it would be thousands a year, but if you get a lump sum then obviously that would be affected too. Definitely get it corrected. I've kept all my old pay slips too, although mine was correct when I checked online.

DB pensions are salary x service x accrual rate. Incorrect part time service goes into the service part of that calculation, so say you worked 1980 to 2010 with full service to 2000 and 50% after, service would be 25 years. If they’ve put in 50% throughout, service would be 15 years. The pension as at leaving date they’ve quoted you could be 15/25 = 60% of the true amount (put in your own numbers to get the real figure!).

Note this is complicated by the fact accrual rates can change over time (though the trend is usually towards less generous rates so if anything your older service would probably be more valuable here, though not always), and different legal revaluation on pensions between leaving and retirement age (some older service tends to do worse here).

In summary - chase it down and don’t take no for an answer if you have the proof! But I would expect this to take more than 4 weeks, sorry.

Thanks @millenhaus.
I wondered where the hours worked came into the equation.

I have 35 years service, 30 of those fall in the DB scheme which closed in 2015, so it could otherwise be a substantial loss to me. Thank goodness I noticed and have retained the evidence!

If your pension is based on reckonabke service (years) then the calculation should be:
X full time years + x years part time

10 years part time is calculated as 10 years x part time hours/ full time hours = ?.?? years.

Part years