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Author Topic: Pension Changes  (Read 100959 times)

silver surfer

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Re: Pension Changes
« Reply #25 on: 21-04-15, 12:45AM »
Let's get a few facts straight here. Consulation v Negotiaton. Under the law proposed changes to a pension scheme there must be a period of CONSULTATION not negotiation - as determined by the Pensions regulator. See http://www.thepensionsregulator.gov.uk/docs/employer-duty-to-consult-on-scheme-changes.pdf. There is a lot of bad mouthng the Unon on here but unless Tesco are breaking the law (and it appears that they are not) if Tesco want to change the scheme the the Union is pretty powerless to stop it. Having said that I would support the idea of a ballot.

Quote
And what will you do if the majority of the over 55's take retirement now and take the whole of their pension pot with them, as is now their right

The above statement is wholly incorrect and you should not be making statements like this which could mislead colleagues. The Tesco Fnal Salary and Pension Builder schemes are Defined Benefit Schemes they do not have a "pot" of money and you cannot draw out the whole lot. You have a pension based on how long you have been in the scheme and how much you earned. Once you have your pension it is yours until you die and can never run out. The changes to pension legislation applies to Defined Contribution schemes. Dont get your hopes up about taking everything out it won't happen. The only way you could get your hands on the money would be to get a cash equivelent transfer value of your Tesco and transfer it to another defined contribution  pension scheme to accept it. Once that is done you could take the lot but bear in mind that a transfer value could be about 40% less of the value it would be if left in the current Tesco scheme. Also when you cash it in only 25% tax free - if you take anymore you will be taxed at your marginal rate and could find that 55% of you "pot" has gone in tax.

See especially point 7 in the article below. Things are bad enough as it is without people on here spouting a load of hogwash.
http://www.theguardian.com/money/2015/mar/02/ten-things-you-will-or-will-not-be-able-to-do-under-the-new-pension-rules

The Mrs

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Re: Pension Changes
« Reply #26 on: 21-04-15, 01:01AM »
My apologies. So angry right now I'm clearly not thinking straight.

There is the cash lump sum that can be taken.

Ethelredtheunready

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Re: Pension Changes
« Reply #27 on: 21-04-15, 02:12AM »
re pike stupidboy!'s  comment "do you think the majority of the workforce understand enough to question and give feedback on a pension system ? Enough to make a difference I think not !"

I for one do not and I would be VERY grateful if someone who understands pensions would or could take the tlime to write an article explaining them

gytha_ogg

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Re: Pension Changes
« Reply #28 on: 21-04-15, 06:07AM »
Alex the death in service is currently 3 times your salary its actually changing to 4 times your salary.

Um... I don't think you're allowed to say positive things on here - you just have to spout anger with little to back it up.
I see nobody has answered my previous question in any useful way.

AlexM

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Re: Pension Changes
« Reply #29 on: 21-04-15, 07:45AM »
Alex the death in service is currently 3 times your salary its actually changing to 4 times your salary.

"If you die before your pension starts…
Your family will receive a tax-free cash lump sum worth five times the pension you’ve already built up.
Your spouse or civil partner will also receive a regular income for the rest of their lives, based on 60% of the pension you’ve already built up.
If you have children, they will receive a regular pension worth 25% of the pension you’ve already built up (40% for two or more children) until they are 16, or 23 if they are in full time education or Trustee approved training."

Forgive me if I have misunderstood the above but suggests something a lot different than what you state. I took it to mean that if I die and I've only managed to build a pension of £2k a year then my family will get a £10k payout.
5x the salary would be considerably more.

burns2015

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Re: Pension Changes
« Reply #30 on: 21-04-15, 09:16AM »
Alex q13 of the Q&A that's goes with briefing

Q13. Will I receive life cover in the new scheme?
Yes. If you die while you’re still employed by Tesco and paying into the scheme, your dependants will receive a lump sum payment worth four times your salary. Plus a refund of everything that you’ve saved - including Tesco’s contributions.  For any other benefits, e.g. ill health, please refer to the consultation letter

burns2015

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Re: Pension Changes
« Reply #31 on: 21-04-15, 09:18AM »
Alex the death in service is currently 3 times your salary its actually changing to 4 times your salary.

Um... I don't think you're allowed to say positive things on here - you just have to spout anger with little to back it up.
I see nobody has answered my previous question in any useful way.
I don't see dieing as being positive. Well unless we all decide to start faking our own deaths as it would be only way we get to spend the money

Nomad

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gomezz

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Re: Pension Changes
« Reply #33 on: 21-04-15, 09:59AM »
So it's better than nothing, so that's ok then is it?
No it is not OK.  I was taking the pragmatic view of how to deal with it if, as is almost certain, it is how things will be.
"The progress of the kart is more important than its direction"

gytha_ogg

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Re: Pension Changes
« Reply #34 on: 21-04-15, 10:44AM »
Alex the death in service is currently 3 times your salary its actually changing to 4 times your salary.

Um... I don't think you're allowed to say positive things on here - you just have to spout anger with little to back it up.
I see nobody has answered my previous question in any useful way.
I don't see dieing as being positive. Well unless we all decide to start faking our own deaths as it would be only way we get to spend the money


The benefit to others if you happen to die is increasing, yes? That seems a fairly positive thing to me.

Duracell

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Re: Pension Changes
« Reply #35 on: 21-04-15, 05:43PM »
The statement made that the benefits you have built up in the current scheme will be unaffected is not correct.

The life cover lump sum  and spouse/dependant income will not be paid in the event of death in service when the scheme is closed as to qualify for this benefit you must be paying into the scheme as shown in a previous post.

The new scheme will pay 4x's you salary plus contributions made in the event of Death in service, however there is no mention of a partners/dependants regular income each year.

Some think that both schemes will pay out for death in service, this benefit in any pension only pays out if your are paying into the scheme at the time of death, so both the defined benefit scheme that they are looking to close will NOT pay out for death in service after its closed to contributions the scheme rules doesn't allow it.

Proposed New scheme, no mention of spouse/dependants regular income.

My Opinion is exactly that, Mine.  Based on my view of what I know , see and what I would do.
"Being a rep doesn't make a person right anymore than not being a rep makes a person wrong " 

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AlexM

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Re: Pension Changes
« Reply #36 on: 21-04-15, 07:13PM »
It does seem very confusing.

Has anyone received their letters yet? I am eager to find out if the company pension really is still competitive or whether it would be better going eslsewhere.

seenitall

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Re: Pension Changes
« Reply #37 on: 21-04-15, 11:37PM »
The general rule is that a company (defined contribution) pension where the employer makes a contribution is almost always more competitive than any scheme elsewhere. There are very few situations where this is not true (e.g. close or past retirement age and below income tax threshold, or you have excessive short term/expensive debt in which case no pension payment at all may be better approach, or just need a few extra quid for a year or two to save for a house deposit)

Many private pensions don't include a "death in service" benefit. 

Yes, the new scheme is less good than the previous defined benefit (annual salary averaged with uplift scheme sometimes called a CARE).  Nothing you can do about that.  And Tesco was one of the last few private defined benefit schemes in any business in the UK, not just retail.  (And I believe the only other retailer defined benefit scheme still running is John Lewis/Waitrose, and they have just restructured that scheme to make it possible to continue as a defined benefit final salary scheme, reducing the annual benefit accrual and introducing a parallel defined contribution component)

Questions to ask (read the paperwork)
  • How is the pension invested? Which management company? Can you express a preference (e.g. shares vs. bonds vs. cash vs. property), coming up to retirement you should be able to ask for your fund to be moved to bonds and cash to have some certainty of final fund size for annuity or drawdown
  • What is the annual management fee (should be similar to stakeholder i. e. 1% per year

Also, unless your take home pay is very low (i.e. only a few hours per week on average even at starting GA pay) or you are under a certain age, you will be auto-enrolled into the new pension pension unless you opt out.  That's the law, not a Tesco policy.

CAVEAT: I am not a financial advisor.  If in any doubt then I would suggest getting in touch with CAB, Money Advice Service, maybe USDAW, or with an independent financial advisor not tied to any pension provider (expect to pay a consultation fee for advisor advice although the fee may not be charged if it is clear that it would not be to your advantage to buy any products through them).


seenitall

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Re: Pension Changes
« Reply #38 on: 22-04-15, 12:02AM »
re pike stupidboy!'s  comment "do you think the majority of the workforce understand enough to question and give feedback on a pension system ? Enough to make a difference I think not !"

I for one do not and I would be VERY grateful if someone who understands pensions would or could take the time to write an article explaining them

Alas that would take a whole book, not just a few words here on VLH. 

Best place to start is the free government Money Advice Service (website & phone line), who can explain the jargon at least.  I expect that the Consumer's Association ("Which") also publish some guides, check your local library to see if they have anything or look at the Which website.


seenitall

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Re: Pension Changes
« Reply #39 on: 22-04-15, 12:20AM »
...
Proposed New scheme, no mention of spouse/dependants regular income.

It's not typical for a defined contribution pension scheme to pay spouse/dependants income on death in service, this is more of a feature of DB schemes. 

But there is nothing to stop the spouse/dependants taking the death payment and pension refund to buy an annuity to get an income..however the annual income is likely to be very low.  The money received on death could also be invested in an income-oriented investment (bond fund or similar, or rental property) and live off the earnings of that and/or draw down over time.

After retirement with a DC scheme, well, it depends what sort of annuity you buy with your pension pot.  I think you can buy annuity that offers an income to the spouse, there are other options, and a financial advisor could sort that out, but it is not likely to be cheap.

In this brave new world, if a income for your spouse/dependants is important to you, then consider taking out a life insurance policy separately. You can get non-endowment life policies which will pay a lump sum if you die (and nothing if you don't within a fixed period..no ongoing investment component), this is likely to be the cheapest approach per month.  You may find that a top-up private defined contribution pension (running alongside the Tesco one) may offer a life insurance benefit if that is a concern but these may not be as good in vestment as doing an tax free ISA every year with your spare savings.  Also worth checking out "Friendly Societies" as you can pay into these alongside an ISA tax free and you may be able to get a life insurance benefit, too.

CAVEAT: I am not a financial advisor.

seenitall

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Re: Pension Changes
« Reply #40 on: 22-04-15, 12:27AM »
The general rule is that a company (defined contribution) pension where the employer makes a contribution is almost always more competitive than any scheme elsewhere. There are very few situations where this is not true (e.g. close or past retirement age and below income tax threshold, or you have excessive short term/expensive debt in which case no pension payment at all may be better approach, or just need a few extra quid for a year or two to save for a house deposit)


Yes, I am quoting my own post, bad form i know, but just thought of an extra point...
[Admins..if you wish to delete this post and edit this extra point into a previous post, feel free]

If you decide to opt out of the Tesco DC pension, and you have no better use for that 5% extra in your salary, then the history of recent years seems to suggest that investing in an tax free ISA (ideally one with a low management fee--e.g. 1%) may be better than a non-Tesco pension for some people.  More flexible, certainly, draw out what you want, when you want it, and some flex on how to invest it. 

ISA money would be after tax (pension is effectively before tax--if non-Tesco pension then the payment will be increased by the provider who claims the tax back from HMRC at standard rate--Tesco pension contribution would come off your pay before tax on your payslip).


troll-hunter

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Re: Pension Changes
« Reply #41 on: 22-04-15, 12:44AM »
Seenitall, I am not up to date with any changes made in the last budget so if I am in error you have my apologies but what you describe, the 'ISA' provider claiming the relevant  tax relief for their customers, sounds, to me, more like an SIPP rather than an ISA.


That said, I would second Ethelredtheunready's post  "I would be VERY grateful if someone who understands pensions would or could take the tlime to write an article explaining them"
« Last Edit: 22-04-15, 12:47AM by troll-hunter »

StaveTSW

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Re: Pension Changes
« Reply #42 on: 22-04-15, 08:33AM »
I am unclear about what is happening to the pension we have already built up.   I have 20 years of service (and pension) in the Final Salary scheme.    If I retired in 5yrs would I receive; a) the final salary scheme (frozen for 5yrs) plus this new scheme  b) all of my contributions for 25yrs lumped together and transferred into the new scheme c) something else?

Duracell

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Re: Pension Changes
« Reply #43 on: 22-04-15, 09:01AM »
No scheme a.would pay the projected income at the time of scheme freeze, scheme b would realease a pot to be invested for a regular income.

As I understand it ( feel free to correct any error).
My Opinion is exactly that, Mine.  Based on my view of what I know , see and what I would do.
"Being a rep doesn't make a person right anymore than not being a rep makes a person wrong " 

Duracell.

Loki

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Re: Pension Changes
« Reply #44 on: 22-04-15, 12:38PM »
The following has already been touched upon by by AlexM of which I will post in its entirity:

What percentage do we pay currently? Does the company match this?

The amount you pay depends on which section of the scheme you’re in. Most people are in the Pension Builder section where they pay 5% of pensionable salary. 

The amount Tesco pays does not depend on what you pay. As the current scheme is defined benefit, Tesco has to pay the balance of cost of providing your benefits and those of everyone else in the scheme (including people who have already left Tesco).

Does this mean Tesco would be paying lower contributions?

No. If the proposals go ahead, Tesco expects to pay more in total into the existing and proposed new schemes than before Dave Lewis announced the intention to consult on change earlier this year.

If my circumstances changed, could I reduce or increase the amount I pay?

Yes. You could change how much you pay into the DC scheme, subject to a minimum. We do not know yet how often you would be able to make this choice but we would be able to tell you if the proposals go ahead.

What’s the highest contribution I will be able to make?

There would be no maximum limit. However you would only get tax relief on contributions up to 100% of your annual earnings.  Or if you were a non-tax payer, under relief at source you would only receive a tax credit on your own contributions up to £3,600 a year.

Also, if total pension contributions (i.e. what you and Tesco have paid) were greater than the Annual Allowance (currently £40,000) in any year, then you would have to pay a tax charge on the amount above £40,000. 

What would happen if I leave Tesco?

If you leave Tesco after the proposed changes went ahead, your defined benefit pension will remain in the defined benefit scheme, and will increase with inflation until you retire.

If you’ve built up retirement savings in the proposed defined contribution scheme, they will remain invested until you retire. You will no longer be able to contribute to this defined contribution scheme.

You can choose to transfer benefits from both schemes to another pension scheme.

What would happen with my Additional Voluntary Contributions (AVCs) I’ve paid into the current scheme?

AVCs you had already paid into the existing scheme wouldn’t be affected, but you wouldn’t be able to pay any new AVCs. You would, however, be able to pay additional contributions into the new scheme. 

Would I be able to opt out?

Yes. You could opt out of the new scheme at any time (just as you can with our current scheme). However if you did, you would miss out on valuable life assurance and Company contributions towards your retirement.

Would the new scheme apply to everyone in the business, from the top down?

Yes. The existing scheme would close for all colleagues and the proposed new defined contribution scheme would be available to everyone. 

Would we still have ill-health benefits?

Yes. If you were too ill to work, you would be able to apply to receive your retirement savings from the new scheme early and choose whether to take as cash, income for the rest of your life or a mixture.

If you were also in the existing defined benefit scheme you could be able to draw a benefit from that scheme too.

What’s the main difference between defined benefit (DB) and defined contribution (DC)?

In a DB scheme, like Pension Builder, you build up a pension during your service with the Company and you are paid this pension from the date you retire for the rest of your life.  The pension is calculated by a set formula and the amount depends on the length of your service and your salary.

In a DC scheme the money you and the Company pay in (plus the money the Government pays on your behalf) goes into your retirement savings.  The savings increase with investment returns over your working life and when you retire you can choose whether to take it as cash, a regular income or by taking a bit at a time through draw down.  The size of your retirement savings will depend on how much you contribute and actual investment returns.

What would be the maximum I could draw out tax free at retirement?

At present you are able to take up to 25% of your total retirement savings tax-free.

When I retire, would I still receive a pension until I die?

This is one of the options open to you. You could choose to use your retirement savings to buy an ‘annuity’ that would give you a regular income for the rest of your life.

You would also have the option to include an income to your spouse/partner on your death.

What type of fund choice would we have and which companies would provide them?

We haven’t yet decided what these funds will be or who will provide them. We will be able to share more details if the proposals go ahead.

What protection would my savings have?

We would want our new scheme to be looked after by a Board of Trustees, just like our current scheme.  They would make sure that it is being administered correctly, and that the funds offered to members are only from strong and reputable companies.

How would my ill health early retirement option be affected? 

If you weren’t expected to be able to work again, the Trustee could decide to pay you a pension even if you’re under age 55.  This would be based on the pension you’d built up, reduced for early payment in line with the scheme rules. If you’re a member of the proposed new scheme, you may be able to apply to take your retirement savings early.

Is that the Retail Price Index (RPI) or Consumer Price Index (CPI)?

Before you retire, most of your pension would increase each year in line with the Consumer Price Index (CPI) up to 5%.

After you retire, most of your pension built up before June 2012 increases with the Retail Price Index (RPI) up to 5% each year, and pension built up after June 2012 increases with CPI up to 5% each year.

Will I receive life cover in the proposed defined contribution scheme?

Yes. If you die while you’re still employed by Tesco and paying into the new scheme, your dependants will receive a lump sum payment, plus a refund of everything that you’ve saved - including Tesco’s contributions.

In addition, if you’ve paid into the current scheme, your family will receive the death benefits from the defined benefit scheme too.

If the current scheme closes, will I still get life cover from the defined benefit scheme if I die before I start receiving my pension from it?

Yes.  If you have been a member of the current pension scheme and die after the proposed closure of the scheme and before you receive any pension from it, your family will get:

*A lump sum equal to five times the pension you’ve built up (including any increases between the proposed scheme closure and your date of death)

*A pension for your spouse or civil partner, worth 60% of the pension you’ve built up (including any increases between the proposed scheme closure and your date of death).

*A pension for your children, equal to 25% of the pension you’ve built up (including any increases between the proposed scheme closure and your date of death).for one child, or 40% to be split between your children if you have more than one child.  The pension is payable until age 16 or age 23 if the recipient is in education or Trustee-approved training.

This is in addition to any life cover that you’d get from the proposed defined contribution scheme.
« Last Edit: 22-04-15, 12:40PM by Loki »

Egg Head

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Re: Pension Changes
« Reply #45 on: 22-04-15, 01:25PM »
Tesco also said its net debt had risen from £6.6 billion to £8.5 billion, while its net pension deficit had ballooned to £3.9 billion from £2.6 billion. The company today agreed to pay £270 million per year into the pension fund to help address the shortfall.

blutopia

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Re: Pension Changes
« Reply #46 on: 22-04-15, 02:03PM »
It has become impossible to plan for retirement, the rules change so often - the retirement age, interest rates, the rules governing the company pension scheme, how permanently Tesco will match colleague contributions, rules on government top-up benefits, pension 'freedom' (whatever that will turn out to be in reality).

The Tesco proposals actually change little for me except shift the balance to some projected dependency on housing and council tax benefits, but if the rules change again before I retire....?  Consequently my only argument in the consultation is that I preferred what appeared to be the greater certainty from the defined benefit scheme.

seenitall

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Re: Pension Changes
« Reply #47 on: 22-04-15, 11:50PM »
Seenitall, I am not up to date with any changes made in the last budget so if I am in error you have my apologies but what you describe, the 'ISA' provider claiming the relevant  tax relief for their customers, sounds, to me, more like an SIPP rather than an ISA.

Sorry if I was a bit unclear.  ISA rules have not changed much in recent years..you get a tax relief on any gains in the money invested, but you have to pay in using after tax money from your wages (so no income tax relief), but ISA is more flexible than a pension but lower long term returns. 

I was avoiding mentioning SIPPs since these are more complex to set up and run and tend to cost more in management fees and hence less likely to be relevant to most Tesco employees. Main benefit of SIPP is greater freedom of investment choice including property (but not your own home usually).  Property in a SIPP is also a bit tricky since you need lots of money in the SIPP in the first place to be able to buy the property outright using only SIPP money, but then the SIPP gets the rental income or capital gains.

silver surfer

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Re: Pension Changes
« Reply #48 on: 23-04-15, 12:21AM »
Not seen anything on here about the proposed pension arrangements for those who are Senior staff - Work Level 3 and above  but this is what they are getting.

"You choose what to pay in- You can save between 6% and10% of your salary every 4 weeks.If you change your mind you can change how much you pay".

"Tesco will pay in one and a half times more - For any contribution you make between 6% and 10% of your salary, Tesco will pay in one and a half times the amount you pay. So if you pay in 10%, Tesco will pay in 15%"

"If you die while you’re still employed by Tesco and paying into the scheme, your dependants will receive a lump sum payment worth five times your salary. Plus a refund of everything that you’ve saved - including Tesco’s
contributions."

So are we all in this together? Those on the big money seem to have looked after themselves so they get even more. So there we we have it, those chiefly responsible for the dire condition the company is in trouser far more than us drones on the front line. I think the changes are a done deal and the consulation is a sham and is merely going through the legal motions required however hope I am proved wrong.  Therefore I beg you  all to call or email the consultation helpline to express your disgust about the unfairness of the proposed changes. MAKE OUR VIEWS KNOWN.

Duracell

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Re: Pension Changes
« Reply #49 on: 23-04-15, 09:22AM »


Will I receive life cover in the proposed defined contribution scheme?

Yes. If you die while you’re still employed by Tesco and paying into the new scheme, your dependants will receive a lump sum payment, plus a refund of everything that you’ve saved - including Tesco’s contributions.

In addition, if you’ve paid into the current scheme, your family will receive the death benefits from the defined benefit scheme too.

If the current scheme closes, will I still get life cover from the defined benefit scheme if I die before I start receiving my pension from it?

Yes.  If you have been a member of the current pension scheme and die after the proposed closure of the scheme and before you receive any pension from it, your family will get:

*A lump sum equal to five times the pension you’ve built up (including any increases between the proposed scheme closure and your date of death)

*A pension for your spouse or civil partner, worth 60% of the pension you’ve built up (including any increases between the proposed scheme closure and your date of death).

*A pension for your children, equal to 25% of the pension you’ve built up (including any increases between the proposed scheme closure and your date of death).for one child, or 40% to be split between your children if you have more than one child.  The pension is payable until age 16 or age 23 if the recipient is in education or Trustee-approved training.

This is in addition to any life cover that you’d get from the proposed defined contribution scheme.


Where has this information come from?
As the the scheme rules quite clearly state that the "Death in Service life cover" is on condition that you are contributing to the scheme at the time of death, with the start of the DC scheme you will not be paying in to the DB schemes so I can't see this as being correct unless they are changing the scheme rules for the transition.

So this info is saying that if you die in service then, you will recieve

9 x's your Salary 5x's old scheme + 4x's new scheme

+ Contributions paid into New Scheme

+ A pension for your spouse or civil partner, worth 60% of the pension you’ve built up (including any increases between the proposed scheme closure and your date of death).

+ A pension for your children, equal to 25% of the pension you’ve built up (including any increases between the proposed scheme closure and your date of death).for one child, or 40% to be split between your children if you have more than one child.  The pension is payable until age 16 or age 23 if the recipient is in education or Trustee-approved training.

Really ????? WOW

Lump sums possibly being as much in some cases as = £0.25m for death in service

Not sure how much I trust the wife now.

REALLY ??
My Opinion is exactly that, Mine.  Based on my view of what I know , see and what I would do.
"Being a rep doesn't make a person right anymore than not being a rep makes a person wrong " 

Duracell.