Letter explaining injustices of deemed buyback – Ros Altmann

    Ros is a leading authority on both private and state pensions,annuities and
    retirement policy. Numerous major awards have recognised her work to
    demystify finance and make pensions work better for people.

  • Ros Altmann

    Ros Altmann

    Letter explaining injustices of deemed buyback

    Letter explaining injustices of deemed buyback

    Letter explaining injustices of deemed buyback

    by Dr. Ros Altmann

    (All material on this page is subject to copyright and must not be reproduced without the author’s permission.)

    I read with great interest Roger May’s letter, regarding the problem of members losing AVCs if they take deemed  buyback.  If only Mr. May’s views were true.  I have had heart-rending emails from individuals who are being told by their trustees that they can only receive their state pension rights back if they sacrifice tens of thousands of pounds worth of AVCs.  They can find no-one to advise them and have no idea what to do.

    The trustees insist that members must surrender their AVCs to take deemed buyback and also ensure they sign that this is full and final settlement of all rights, so they will be unable to challenge the trustees.

    Contrary to Mr. May’s assertions about the ‘the law is perfectly clear’ the DWP has obtained legal advice that they can insist upon this course of action.

    I have been shown a letter from Miss Sheila Whincup, from the Service Development Group Technical (Pensions) Division, who says “Our DWP Policy section have now obtained legal advice that confirms that the value of a member’s AVCs should be included when calculating his share of the fund (i.e. his Actual Transfer Value (ATV) and 100% MFR transfer value (MFRTV figures) when applying for deemed buyback.”  She goes on to explain that, because the regulations do not specifically exclude members’ AVCs when calculating “member’s rights” to be transferred, the Government intends to include them. 

    Apparently, if trustees or members are not comfortable with this, they can test the issue in the courts.  Neither trustees nor members who have lost substantial amounts of pension savings can afford to sue the Inland Revenue, so the reality is that members are being put in an impossible position. 

    Deemed buyback is not working properly for most members.  However, for those with substantial AVCs it is a shameful disgrace.  They are supposed to take advice on this decision, but on-one will advise them.  What is being done to help remedy these injustices?

    As Roger May says, AVCs were supposed to be protected as the top priority under the 1995 legislation, but this protection has disappeared for many members in practice.   Would any pension lawyer care to represent some of these people in suing the Government on a pro bono basis?

    8th February 2007

    I fully agree with Roger May that the Inland Revenue’s demand to confiscate members’ Additional Voluntary Contributions on deemed buyback is morally indefensible, but I am afraid that is what is happening.  The most recent example I have come across is a couple, both in their 50’s, whose independent trustees have taken legal advice on this and refused to allow the members to have their AVCs unless they opt for the annuity rather than deemed buyback.  The members wrote to the trustees specifically asking them to secure their AVCs separately and explained that they wanted to take deemed buyback but not in return for their £20,000 worth of AVCs.  The trustees insist that their legal advice says the Inland Revenue can take these AVCs for deemed buyback.  The members could not find anyone to advise them, so they opted not to go back into the state scheme.  As a result, they will most likely receive less pension overall.   If Mr. May would like to represent these good people pro bono, in suing their trustees (not the Government) I am sure they would be enormously grateful.  They cannot afford to pay.  Sadly, many others across the country are being put in the same position and it is no use to them if a lawyer says that the law is ‘very clear’.  If the law was so clear, the trustees and the Inland Revenue could not have received advice to condone the confiscation of the AVCs.  Unfortunately, it seems where scheme wind-ups before the PPF are concerned, the injustices just keep happening.

    Yours faithfully,

    Dr. Ros Altmann

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