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

Integrated schemes try to target a pension level that includes State Pensions. They make a scheme harder to understand, can be unfair to those on lower salaries and can make a scheme look more generous if you don't fully understand how they work. Some integrated schemes pay extra before the state retirement age to make up for the fact that you are not getting a State Pension. Others will make a deduction once you reach state pension age. Some campaigners have called this a 'clawback'.

There are different ways the calculations are made, and some are rather complicated. The simplest way is to take a fraction of the current State 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 (LEL), as well as social security benefits. (If you earn below the LEL, you do not have to pay National Insurance (NI) 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. Because integrated schemes can be unfair, particularly to those on low salaries, some trade unions have 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.

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.