Background
The Kimberly-Clark Pension Scheme was incorporated on 4th February 1965 and operated for 35 years. The Defined Benefit section of the Scheme closed to new members in 2000 and was replaced for new joiners by the Defined Contribution arrangements.
This process of closing Defined Benefit schemes and replacing them with Defined Contribution schemes has been common practice across the UK in the preceding decades, as Defined Contribution schemes offer employees fewer benefits and are thus more cost-efficient for employers.
The Kimberly-Clark Defined Contribution Section was then closed to new joiners in 2019.
DB Pension Scheme Deficits
The Defined Benefit scheme has been in deficit since 2020 based on their latest funding statement from 2022.
The scheme's funding has improved since 2020 when it was 96% funded, but has not recovered fully yet and is still in deficit.
As below, as of 5th April 2022, the current funding level is 99.7% as per the table below. Which, in fairness, is much better than many underfunded DB schemes we have seen.
(Source: Kimberly-Clark – Funding Statement 2022)
What Does Being In Pension Deficit Mean? How Might It Affect You?
The Kimberly-Clark Defined Benefit Pension Scheme being in a deficit is as simple as it sounds. It means the scheme is currently underfunded in consideration of the future defined benefits that it has promised to pay you, its members.
The Trustees of the scheme have an obligation to report the level of underfunding and pension deficits to The Pension Regulator (TPR), and they must put in place a Recovery Plan.
Putting in place a Recovery Plan is a good start to protecting members' future income, as it at least acknowledges that there is a problem with the funding level of the scheme.
However, to our knowledge, there is no legal requirement for the scheme to successfully complete the Recovery Plan. Likewise, there is no penalty for them not successfully achieving the Recovery Plan. They would simply need to resubmit a new Recovery Plan to The Pensions Regulator.
How Is Your Money Invested
The Defined Benefit Assets are invested between growth assets (18%) and matching assets (82%). There has been a huge amount of talk and speculation recently around Liability-Driven Investments (LDI) and their possible advantages or disadvantages. We actually have a free educational video in this recent phenomenon:
Liability Driven Investments (LDIs) – How Safe Is Your Final Salary Scheme? Kwasi Kwarteng Meltdown
Facts About Defined Benefit Pension Scheme
- Indexing – did not find
- Consumer Prices Index (CPI) = 3-5%
- Spouse pension benefits = 50%
- Child pension benefits = At discretion of Trustee
- Early Retirement = Earliest from age of 55
- Late Retirement = Latest by age of 75
- Tax Free Cash = 25%
Retail Price Index (RPI) or Consumer Prices Index (CPI)
Once the Kimberly-Clark Scheme pension is in payment, it is increased each year to help it keep pace with inflation as measured by the Consumer Prices Index (CPI). Different elements of the pension receive different increases depending on when the client earned it.
- If earned the pension before April 1997, the increase is fixed at 3%
- If earned the pension after April 1997, increases are currently based on CPI with a minimum of 3% and a maximum of 5% increase.
If the pension is in payment, and it includes a GMP that was earned between 1988 and 1997, this part of the pension is increased by CPI to a maximum of 3%. There is no increase on GMP earned before 1988.
Spouse and Children Benefits
In case a scheme member dies, a pension is automatically paid to their spouse or civil partner. If the member completed a Specified Dependant Form while in active service, this person will be treated as a legal spouse/civil partner. If the member is not married, a refund of contributions is payable.
There is a spouse's pension payable of 50% of the member's early retirement pension at the date of death. There is also a spouse's pension payable of 50% of the member's pre commutation pension revalued to the date of death. There is a 5-year guarantee period.
There is a young spouse reduction applied for spouse's more than 10 years younger than the member. This is at a rate of 2.5% for each complete year over the 10 years.
Children's pensions are paid to children under the age of 16, or 23 if they remain in full time education.
Early & Late Retirement
Clients can start to take their Kimberly-Clark pension at any time after the age of 55, if Kimberly-Clark and/or the Trustee agree. If the client decides to retire early, their annual pension amount will be reduced for early payment, to take account for it being paid for longer. Please note that the government plans to raise the minimum retirement age to 57 in 2028.
Clients can also choose to delay taking their pension after normal retirement age. Then the annual pension amount will be increased to take account for later payment.
Members also can choose to give up some of their pension in exchange for a cash lump sum at retirement, a maximum of 25%.
Why Doesn’t a DB Transfer Happens In Days?
A pension transfer timeline of 7-months may sound like a long period of time.
However, the level of regulation that has been put in place by the FCA for DB CETV transfers over £30,000 is extremely stringent. It now takes months to take you through the legally required to be authorised and regulated advice process with the Independent 3rd Party FCA Regulated Pension Transfer Specialist.
Many clients find the legislation frustrating, but it is there to protect you from being taken advantage of or making a mistake on one of your biggest assets. Either by transferring out of your defined benefit scheme and giving up your guaranteed income for life without fully understanding your options, or falling prey to an unscrupulous Adviser or scam.
One big example of this in the UK was the ‘British Steel Scandal’ where steelworkers could choose by December 2017 between moving to a new company scheme or joining a lifeboat scheme called the Pension Protection Fund. But many were advised to move funds into schemes with no guaranteed income, generating bigger fees for advisers (Reuters, 2023).
At the end of the day, your Kimberly-Clark Pension Scheme staff and Trustees have a legal requirement and job to do in protecting you and ensuring you have received regulated and authorised advice and satisfied any possible amber flags on your transfer. As such, we try to work with Kimberly-Clark rather than against them, providing all requested information in the simplest and most digestible format for them to easily approve your transfer as quickly as possible.
We always say it is similar to writing an examination answer back at University. A convoluted and long-winded answer is unlikely to score as highly from the examiner, even if technically it includes exactly the same information as a smooth and well constructed answer. The smooth answer will typically score higher as it makes the examiners' life easy when they have a backlog of papers to mark.
We have over a decade of experience from our CEO, of knowing what, when and how to present information to your defined ceding scheme to try to make their due diligence processes easy and optimise your transfer timeline should you decide to move ahead with a transfer following your Defined Benefit Suitability Report from the Independent 3rd Party FCA Regulated Pension Transfer Specialist.
How Fast Or Slow Are Cameron James At Completing Transfers?
To our knowledge, we are one of the fastest in the industry. We know this as even the ceding DB schemes (who are typically not always the most friendly to IFA firms) often comment on the speed and accuracy of our paperwork and transfers.
One of the key reasons for this is the sheer volume of DB and DC transfers that our teams facilitate on a weekly basis. As such, our staff are extremely familiar with the often convoluted and complicated forms and paperwork that must be completed and submitted to your scheme prior to the Cash Equivalent Transfer Value (CETV) expiry date. Which in turn allows our teams to process paperwork faster and with greater accuracy.
In fact, we often already know from experience exactly which forms or additional questionnaires your scheme will request before they have even sent them to us.
Moreover, all our internal departments involved in completing a Defined Benefit pension transfer know their roles and execute them well. The IFA Team, Support Team, Compliance Team and finally the Transfers Team.
We operate classic Fordism. Each department specialises, rather than trying to have staff who do everything from start to finish, which often is ineffective and inefficient. We know this from trial and error over the years.
Without our services and team experience, the above transfer example of 7.06 months would likely have taken 12-months or more.
In a worst-case scenario, which we do hear from clients who have had failed transfer attempts with other IFAs before coming to us, the transfer could have been entirely blocked by the Trustee, meaning your initial advice fee would be lost, and you would need to start all over again with a new CETV and new set of charges.
Kindly note it is important to clarify that Cameron James will liaise with your Ceding scheme and help complete the transfer, but all Defined Benefit Transfer suitability advice is completed by the Independent 3rd Party FCA Regulated Pension Transfer Specialist.
Our Transfer Team
You will come to love this team, perhaps even more than your IFA.
Our Transfer Team is here to contact your scheme every 3-5 working days until your transfer is complete, sending you bi-weekly updates.
Every working day 8am-5pm they will be calling all UK schemes to ensure our clients' transfers are being appropriately handled, including yours.
Holding schemes accountable to their own timelines and highlighting to them when they have fallen short. The Transfer Team will also automatically submit a complaint from our side, if we believe your transfer is unduly delayed, or that you are owed some form of compensation.
Watch the below YouTube Video, to learn how we had £9,731.29 paid to our client from his Defined Benefit Scheme in 2023 due to the timeline of his transfer.
Our Transfer Team Verdict On The Kimberly-Clark Defined Benefit Pension Scheme – 8/10
The scheme administrators are generally very helpful, they answer phones within 5-10 minutes, which is far better than some schemes whom we must wait up to 60-minutes to speak with.
They answer emails within 5 working days, which is again far better than the industry standard from our experience. In respect of the exact above case, the case was assigned to a specific team member at Kimberly-Clark. Allowing for a far more efficient transfer process as we spoke with the same member of staff through the process. Furthermore, the pension scheme information provided by the Kimberly-Clark scheme was well-structured, and covered all important aspects.
When schemes send well-structured information to us, it reduces the number of times we need to call and chase them via email, which is a massive help. As it allows us to submit all the required CETV information to the Pension Transfer Specialist faster, which in turn allows our clients to receive their authorised and regulated advice on their safeguarded assets sooner.
Kindly note, the above information is from the latest paperwork that we have on file or from publicly available information. We will always do our best to update information wherever possible, but cannot guarantee 100% accuracy.
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