Alaric wrote:BrummieDave wrote:Some combined DB and DC schemes, where a DB scheme has closed and the same employer opened a DC scheme for subsequent contributions, treat the two pensions as one for certain aspects such as calculating the PCLS for each, adding them, then allowing the whole amount to be taken from the DC fund thus leaving more of the DB pension intact. This has the benefit of preserving the greater benefits of DB whilst accessing the full PCLS of the two schemes but from only the DC fund.
I think to make that work, it's constructed as legally one scheme, but with two sections. It may even be a common method for Companies that ran a DB scheme in the past, closed it to new entrants and additional accruals but continued to pay into a scheme with defined contribution benefits. Continuing employees would then have both types of pension arising from a single employment.
Indeed, and I'm a long standing Trustee of such a scheme. We are one overall scheme, with many sections, some DB, some DC, primarily due to the acquisitive nature of the sponsoring employer.
But even within such a construct, it is very unusual for the scheme rules to allow a member to calculate the combined PCLS for their DB and DC, and then take this aggregated amount exclusively from their DC. The reason is that this can put a funding strain on the DB scheme, because the overall liabilities will have been calculated by the scheme's actuary based on an assumption of what % each member will take as a PCLS. The approach of taking the aggregated PCLS exclusively from the DC pot as outlined above, would therefore imply a lower, potentially zero, PCLS from the DB, leaving a larger than actuarially assumed DB pension for the member, and thus potentially create a funding strain on the overall DB scheme, especially if the option was extended to all members.
As I say, I've only ever seen it once, and that was for a very small cohort of transferred in employees within a section of a scheme with many thousands of members who didn't have this option. It was part of the Ts and Cs from the previous employer and was carried across at transfer/acquisition.