Altimeter and Terrain

The altimeter gives altitude in meters above sea level. It needs to give altitude from the terrain the rocket/spacecraft is flying over. This became an issue when I was trying to land a shuttle on a flat desert. The altimeter indicated I was 850 meters above the ground. I was about to pitch my nose up to reduce descent speed when I suddenly hit the ground. In this case the ground was about 800 meters above sea level. Understanding that the launch point is 424 meters above sea level, I still was about 400 meters closer to the ground than the altimeter lead me to believe. Usually, I just let the shuttle come down on the water and floats briefly.