FREQUENTLY ASKED QUESTIONS
Please ask your questions about the Association or about your pension by completing the form below. Questions will be answered in the Newsletter if of general interest, or may be answered directly to you. Frequently asked questions/answers may be displayed here.
Why are my salary pension increases so low?
Q. I read in Choice (consumer magazine) that the government has proposed restricting final salary pension increases to 2.5 per cent per annum, down from the current maximum of 5 per cent. I am 70 and have received my State pension for the last five years. The pension fund administrators write to me every year informing me of the increase for the following year. Last year I had a letter stating an increase of 4.4 per cent would apply from April 1 2007, but when I received the first payment the gross increase was just 2.23 per cent. When I contacted the administrators they explained in jargon I could not understand that the payment made was related to the guaranteed minimum pension and the State is responsible for the rest of the increase.
I obtained the Pension Service booklet NP46, but I still don’t understand how this works and I have now written to the Pension Service seeking a comprehensible explanation. During the past five years letters from my pension fund administrators have shown increases that are consistently several percentage points higher than the actual increases I have received. The cumulative total ‘on paper’ is 15.8 per cent, whereas the actual amount I have received is 7.99 per cent.Apart from the annual cost-of-living rise, the only increase to my State pension over the same period has been an extra 59p on my Graduated Pension. Could you explain in simple terms why this is?
A. The situation you describe is one of the most complicated aspects of final salary pension schemes and – as you have already experienced – it can be very difficult to reach a conclusion.
It would seem your pension includes some element of Guaranteed Minimum Pension (GMP) liability from a `contracted out’ scheme – ie the scheme was `contracted out’ of the State second pension (what was SERPS) and is therefore responsible for an element of the indexation of this benefit. This will be affected by your employment history and other factors.
Consequently, as only part of the increased responsibility for indexation falls to the scheme trustees, the rest of it falls to the State and this will have the net result of reducing what the scheme actually pays. The remainder should be taken up by the State. You question whether or not this has actually happened. It may be that the increases are not actually shown as increases on your pension statements, but included with other figures.
The best way forward is to write to the administrators of the scheme and ask them specifically how much of your pension is GMP liability, how much is paid by the scheme and how much should fall to the State? Should you then be unclear as to whether the State is actually paying these benefits, write to the Pension Service again, asking them this specific question.
Chevron’s Dave Medler added “that the above is really a surface scratching answer that partially applies to Chevron retirees. The reality is somewhat more confusing, and then Chevron also throw discretionary increases into the mix which make things even more complicated.
I am trying to remember how many different bits of a pension there are and what carries a mandatory increase. You have pre and post 88 GMP, which is only split out and increased after a person has attained age 65. Increases to Pre88 GMP are the responsibility of the State, whilst post 88 GMP is increased by the Pension Plan each April in line with RPI but capped at 3%. If RPI runs above 3%, then I believe that increases in excess of this amount are again the responsibility of the State.
GMP accrual ceased April 1997, and new legislation was introduced that required Schemes to increase all pension accrued after April 1997, once in payment, in line with RPI, but capped at 5%. As you will be aware, this impacted heavily on Chevron and Texaco. Subsequant changes have reduced this to RPI capped at 2.5% for pension accrued post April 2005.
I think that just about covers it!!”
Q. Who should be informed when I die?
A. Barnett Waddingham and then the CUKPA Treaurer
Q. How will the merger of the funds affect us?
A. The merger of the funds will not change existing pensioners rights. However, there are nauances on how the funds are managed and these could be changed things like the frequency of cost of living rises, how pensioners are supported and informed, and how groups like ours are supported/liaised with.
Q. A Milford Haven deferred pensioner had 1997 pension estimates, but asks what pension will he receive if he retires at 55 and at 65?
A. Please ask Barnett Waddingham on their free phone number 03442643587 saying you are a CHEVRON deferred pensioner and ask for up to date estimates.
Q. Frequently we receive envelopes with one sheet of paper. These letters could be combined into one envelope saving money and resources.
A. This is company mail, not mail form the Pensioners Association. We are very careful about wasting the members subscriptions on unnecessary mailings.
Q. The company didn’t communicate any information about their support for the Chevron employees affected by hurricanes Katrina or Rita to UK pensioners.
A. It is sad that the company having put the effort in to helping the victims seems unable or unwilling to include us in their communications, especially as some of those affected may be known to us.
Q. Because there are Texaco Retirees Associations in existence in Pembroke and London why haven’t more Texaco retirees joined the association?
A. We do have 140 members in the Pembroke area as well as many in the London area. The General Manager at the Texaco refinery has agreed to let workers know about our Association as and when they retire from the refinery. The Company make no effort to communicate our Association details to retiring employees, and because of the Data Protection Act we have to rely on word of mouth to let retirees know of our existence.
Q. None of us here are suffering hardship. Do we run the risk of killing the ‘golden goose’ if we offend the company with our activities?
A. We are the lucky ones, there are many of our fellow pensioners who are suffering extreme hardship and in some cases they are reliant on State benefit to supplement their Chevron pensions.. The Company has a financial obligation to shareholders and a moral obligation to the wellbeing of their retirees. One of the main objectives of our Association is to ensure that they don’t forget this.
Q. Why should I join the pensioners association? What do I get for my £10 subscription?
A. We exist to lobby the Company for a better deal for the UK pensioners. Subscription income allows us the facility to have committee meetings to decide our strategy. It allows us the opportunity to travel and meet with senior Company mangers in order to achieve our objectives. In addition it allows us to produce a regular Newsletter to communicate our efforts
Q. What benefits, if any, will the proposed new Pensions Bill offer us?
A. This new Bill will hopefully force the Company to recognise our existence and thus the Company will be legally obliged to talk to us on a regular basis, as well has providing details of our Association to retiring employees.
Q. What is the difference between the UK and US pension schemes?
A. In the US the Employee Share Stock plan forms a major part of a US retirees income not their company pension. In the UK we rely primarily on our company pension as our main source of income, hence the importance of regular
Q. I’m on a fixed pension of £55 per month that has never been increased since my Retirement, why is this?
A. You would have been working for Chevron Oil Europe when they originally pulled out of the UK market in the 80’s and hence would be on a fixed sum pension provided by the COE fund not the current Chevron Texaco scheme.