What does it mean if my salary related pension is 'integrated'? What does 'clawback' mean?

These terms cover various ways of reducing your pension. Instead of basing your pension on a simple calculation based on your salary, years of service and accrual rate, some reduction is made to take account of your state pension as well.

At its crudest someone who worked for a company for all their working life could find their company pension reduced by the level of the state pension.

Campaigners have dubbed this reduction the 'clawback'.

There are different ways the calculations are made, and some are rather complicated.

The simplest way that is used is to take a fraction of the current State Retirement Pension away from your pension for each year you were a member of the scheme.

Other calculations use a figure called the Lower Earnings Limit which is important in working out SERPS and S2P, as well as social security benefits. (If you earn below the Lower Earnings Limit you do not have to pay National Insurance contributions, and are therefore not eligible for benefits that depend on NI contributions.)

Your scheme rules will explain whether your pension is integrated, and how the calculations are made.

Scheme members generally do not like integration as it can:

• make their pension look bigger than it actually will be in practice
• make it harder to work out what you will actually get
• be a source of particular unfairness for some groups, particularly the lower paid.

Some trade unions have therefore mounted vigorous campaigns against integration. A scheme whose integration effectively discriminates against women or part-time workers may be open to legal challenge.  This would require specialist advice.

Of course an integrated scheme that starts with generous benefits, may still provide a better pension than a poor scheme that is not integrated.