Effect of 'integration' on DC schemes

[broken link removed] states that some employers are deducting amounts from the employer contribution to a DC scheme to allow for integration with the state pension scheme - Is this true? It seems ludicrous that an employer could quote a (for example) 7.5% contribution but then make a lower contribution in fact.

But when an employer offers to pay 10 per cent of your salary towards your pension, make sure to ask: “Is that 10 per cent with or without bonuses and integration, and is anything else deducted?”

Click to expand...

I imagine it is true, Aileen Power is an excellent journalist and always produces well researched pieces.

I always thought that integration or coordination was a DB related thing but obviously its not.

ajapale

Yep....

It's true.

Re: Yep....

I hate to disagree with Alan, but I have never heard of such a practice. "Integration" is a feature of Defined Benefit schemes not Defined Contribution plans..If any Employer states that they are contributing 7.5% to the Pension Plan and then deducts some amount in respect of State benefits, this would be in breach of Pension Act rules, disclosure etc.
In a DB scheme the concept of "integration" is rational, i.e. the objective of the Pension Scheme is to top-up the State scheme so that the total pension is say 50% or 3/3rds. After all both the Employer and employee are paying for the State pension also. In addition, where "integration" applies it will be clearly spely out in the Scheme rules and booklet.
However in a DC scheme, there is no target/defined benefit. The Employer committment is confined to a level of contribution say 7.5% or 10% or 15% of Salary. In my experience (not insignificant) I have never come accross an "integrated" Defined Contribution plan. If the Employer promises to pay 7.5% then that is what must be paid and disclosed in the annual benefit statement (as required by the Pensions Act).

Hi....

Conan, yer picking on me these days (and perhaps deservedly ). Anyhow I seem to remember from my ILAC days that these schemes did exist. They were pre 1990 target benefit dc schemes but when they changed post 1990 to be compliant and become true DC shemes I'm not sure that all changed the definition of pensionable salary. But you are right, it doesn't make any sense where there is no target benefit.

I'm starting to doubt myself now. They were the CR arrangement?

Re: Integration

I don't mean to pick on a fellow ex-Lifer.
I don't recall any cases where contributions were based on a % of Pensionable Salary (net of a Social Welfare offset), but it was obviously possible.
You are right in that post 1990 (seems so long ago) DC schemes simply based contributions on a % of actual Salary. Integration is really now only a feature of BD schemes.