GMP, COD and Single Tier Pension

xylophone wrote: »

Sorry, yes. I have edited, see above.



The point is that the GMP part of an occupational pension in payment increases differently from the rest of the pension.

The employer is not required to pay any inflation increase on pre 88 GMP or anything above 3% on post 88 GMP. This cost is met by the Government ( in situations uncomplicated by fixed rate revaluation in deferment etc).

See here http://www.yourpension.org.uk/Files/Files/6.%20Bexley%20GMPGuide240211.pdf

Yes, but if the govt promised not to make any more changes to public sector occupational schemes, then they are breaking that promise if they change the way indexation of GMP works inside those schemes (even if it's just to reflect changes outside the scheme - ie in the state pension).

The GMP revaluation can be swings and roundabouts - what if someone is in a deferred scheme with fixed revaluation at 8.5%? Then they'll carry on getting the 8.5% increases in deferment even though there's no corresponding reduction in the COD from the switchover date.

I can't see why the public sector should have it both ways. Either:

1. Change the public sector schemes to reflect changes in the state pension, and so increase employee contributions by 3.4% to make up for the loss of the employer's NI rebates, and take on the indexation of GMPs, or
2. Don't change the schemes at all, as promised, so don't increase the employee conts to make up for the loss of the NI rebate and don't change the way GMPs are increased inside the scheme.

Maybe the govt should ask the unions which of the above they'd prefer, instead of letting them have it both ways.

Billopp wrote: »

Do you all realise that there are special arrangements between HMRC/DWP to advise public service schemes that they are not paying a GMP increase and that they the occupational pension have to take over payment of GMP increases normally paid by DWP.

I am just discovering that this is going to affect me, thanks to The Indie and C Thompson.

One thing going on that does not seem to have been discussed here is the 'Equalisation of GMPs' required for sex equality reasons. I understand that the DWP is expecting to bring our regulations "in the Spring" to require pension schemes to achieve GMP equalisations, but that because of the complexity of this many pension advisers are suggesting turning GMPs into normal scheme benefits (Google 'GMP conversion'). If they become normal benefits in a DB scheme then they would get uprated along with the normal pension according to whatever rules the scheme has.

So there would appear to be hope on this one?

Hi,

One thing I did not make clear in my post was that this only applies to people reaching state pension age after 5 April 2016 under single-tier pension. I am not effected as I am in receipt of my state pension which also includes a small additional pension as I was contracted out all my working life. When I reached state pension age in 2005 and started with additional state pension of about £5 pw. which is now about £25 pw because of increases on my GMP pension which is much larger than my AP. Both Steve Webb and the DWP have confirmed to me that I won't be effected.

I agree that Steve Webb has a very good understanding off the subject but don't agree with his explanation as to why they can't pay it to people when contracting out ceases. As far as I can see they will still need The AP to work out my increases on GMP after 5 April 2016. All they have to do is record the AP at the date of conversion for existing and future pensioners.

I think the problem is to do with the triple lock on pensions up to say £144 pw and CPI in excess which would make the calculation more complicated.

Another problem they only allow triple lock on state basic pension at the moment and CPI on additional pension/GMP. When single tier starts will they let the difference between increase on Basic pension and say £144 the single-tier pension be allowed to also have a increase at triple-lock for existing pensioners. I think this may cause them terrible problems especially for people who have never been contracted out as someone retiring on say 4 April 2016 will only receive triple lock on basic state pension but a person retiring on 7 April 2016 will be allowed to receive triple lock on Single tier of say £144 which includes state second pension.

What is not good about all this is that he should have mentioned the subject about not paying increases in the green and white papers and risk assessment so that it could be discussed by Parliament and Work and Pensions Committee. As far as I can see it has not been mentioned by the Government in any publication. It is all been done in secret so that people don't know what is going on.

You should all read MOCOP (99) issued by the Treasury on 24 May 2010 which is 50 pages and explains in great detail when the public service scheme has to take over GMP increases. I have just assumed this will also apply to public service schemes when single -tier starts. One of the reasons given by Steve Webb was not increasing the GMP was that peoplple would be able to make it up because of triple lock and future accural which I don't accept if you are a member of a non public service scheme as it looks as if there accrual rate will go down from 60 ths to 70 ths for future service. ie a reduction of I/6 in their pension. How can he think that triple lock can make up for this reduction, 1.4% increase in NI and loss of up to £17,000 to £23,000 on increases depending if you are a man or woman. The more they earn and further they are away from state pension age the bigger the loss will be.

If a person has less than a year to go or is on early retirement and has enough contributions for full pension they wont be able to benefit from earning extra state pension under single tier.