Revaluation of GMP
Comments
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Hello Snowman,
I am just trying to understand what you are saying here. When I retired in 92 I was granted a pension based on years served (29/60 instead of the 40/60 I would have expected to receive). Since then that has been the subject of annual increases based on RPI. That was fine up until SRA last April.
You refer to the "revalued excess" what is the excess at my retirement in 92? My problem is that I do not know how my employer worked out deferred pensions.
I believe that my employer should have taken into account the circumstances surrounding my retirement, they would have known that I was not going to receive a deferred pension.
It just seems unreasoable that having paid into my scheme pension for 29 years, the State now says it will not pay the increases on 35% of my pension that I have paid for.
By the way what does -ve mean in your earlier post please?
Many thanks for your input it is appreciated.0 -
I'm guessing, but "negative" might fit?0
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If you had retired at 60, your pension would have been uprated by your scheme in accordance with its rules.
Once you reached state pension age the gmp portion of your pension would have been split into pre 88 gmp, post 88 gmp and the excess.
The excess would have been uprated in accordance with your scheme rules and the GMP in accordance with the pre and post GMP rules.
Note that the inflation measure used for the additional state pension is now CPI not RPI.
If you type 'second state pension contracted out deduction' into Google you will find a briefing paper for parliament by Djuna Thurley which you might find of interest - it was 2010 so still refers to RPI - the ASP in payment will now be uprated by CPI.
If you type in 'no increase on pre-88 gmp' and go down to "scheme" you will find a pensions ombudsman determination that you might find of interest.
http://www.barnett-waddingham.co.uk/news/2005/12/revaluation-for-early-leavers/ might also be of interest.
Also see http://forums.moneysavingexpert.com/showthread.php?t=3558371&page=2 post 240 -
Hello Snowman,
I am just trying to understand what you are saying here. When I retired in 92 I was granted a pension based on years served (29/60 instead of the 40/60 I would have expected to receive). Since then that has been the subject of annual increases based on RPI. That was fine up until SRA last April.
You refer to the "revalued excess" what is the excess at my retirement in 92? My problem is that I do not know how my employer worked out deferred pensions.
I believe that my employer should have taken into account the circumstances surrounding my retirement, they would have known that I was not going to receive a deferred pension.
It just seems unreasoable that having paid into my scheme pension for 29 years, the State now says it will not pay the increases on 35% of my pension that I have paid for.
By the way what does -ve mean in your earlier post please?
Many thanks for your input it is appreciated.
I wouldn't worry too much about the mention of the leaver who doesn't then retire until SPA earlier and revalued excess (the excess before revaluation is just deferred pension at leaving less GMP at leaving) it was just there to illustrate that the scheme revaluing at 7.5% rather than S148 could be beneficial for some other members of the scheme. Should also have said that the scheme couldn't decide on an individual basis what GMP revaluation method it used, so at any point in time it couldn't give s148 revaluation to one leaver and 7.5% to another leaver on the same date.
So concentrating on early retirements before SPA. The rules of private sector schemes have typically over the years
a) increased the whole of an early retirement pension in payment at the scheme increase in payment rate up to SPA and
b) increased only the excess over GMP after SPA at the scheme increase in payment rate, with the pre 88 GMP element getting no increase and the post 88 GMP getting 3% or RPI increases.
The reason the rules typically do this are so as to broadly integrate with the state scheme so that increases on the GMP aren't generally paid twice. It is completely logical and works very well in most cases.
However it doesn't work perfectly in this aim in every case. And your situation is a case where it doesn't work. However it would be impossible for the scheme to adjust for this through its rules without introducing extraordinary levels of complexity and without having to collect complicated contribution information even for periods before and after someone was employed by the company.
So you really can't blame the company scheme unjust as it feels. The scheme rules state how the pension increases in payment and the scheme are just following those rules.
And you can't really say the state scheme is unjust here because if it wanted to be unjust someone could have included a provision in the state scheme that your basic state pension would be reduced by the negative amount of additional state pension.
The fact that you got your full accrued pension on early retirement 29/60th was arguable a generous feature of the scheme rules. Some other schemes would have reduced the early retirement pension because it was being paid early even on ill health retirement. Yours had no reduction.
Sorry -ve did mean negative
I came, I saw, I melted0 -
And you can't really say the state scheme is unjust here because if it wanted to be unjust someone could have included a provision in the state scheme that your basic state pension would be reduced by the negative amount of additional state pension.
Now that would have been unjust because I paid a full NIC and earned a basic pension.
However thank you for your detailed explanation of all this and your comment about not applying a S148 revaluation in an individual case is interesting because HMRC has told me that this is possible. I am going to approach my previous employer and see what happens but I do now have a real understanding of what is going on here so once again many thanks.
Xylophone, thank you I will have a look at those links.
Thanks to all.0 -
Xylophone, I am not sure whether you will pick this up but this is a quote from the link that you gave me:
"For the 5 years between leaving and taking the pension, the pre-1988 GMP remains as is, but the post-1988 GMP is increased by 6.25% p.a.(thus £2000 becomes £2708 (and total GMP included in final pension is £5708)."
This is the link: http://forums.moneysavingexpert.com/showthread.php?t=3558371&page=2
I understood that on early retirement the entire GMP was re-valued by the appropriate percentage, in my case 7.5%. This quote suggests that only the post 1988 GMP is re-valued. Am I missing something here please?0 -
I think that the poster in that posting (21) on the link (I was referring you to post 24) must be getting confused by the fact that when the state pension is taken, pre 88 GMP increases are not paid by the scheme but by the state?0
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Thank you Xylophone. Yes I am sorry I looked at the wrong post.
I am sorry to rake this up again but why are increases on pre 1988 GMP cancelled out by the increases in post 1988 GMP. In my case I will not receive an increase in pre 88 GMP and post 88 GMP will be increased by 3% by my occupational pension. Why would this affect my pre 88 GMP please?
Thanks for your help.0 -
I have edited this post as I think that I have confused you.
You need to put in your own figures in the calculation shown in
http://dl.dropbox.com/u/452108/20110217094333898.pdf
which I think is the clearest explanation I have come across.0 -
This statement also appears in the "This is Money" article:
"This did not happen so I queried this with DWP who stated I was not due an increase on GMP as the "post-1988" cancelled out the "pre-1988!"."
Looking at your helpful letter again I think that what is being said here is that Post 88 GMP is increased by 3% although the increase is paid by the employer, the Additional Pension is increased by 3.1% (In your letter) and the two pretty well cancel each other out. It is not the Pre 88 GMP that is being cancelled out, but the increase in AP is cancelled out.
What irritates me is the number of times I have been told by Government departments that because I was contracted-out I paid reduced NIC (3% less I believe). I have reminded these people that because I was contracted-out I paid 5% into my occupational pension scheme. They all seem to think that I got an occupational pension for nothing.
Many thanks Xylophone.0
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