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    • mickw488
    • By mickw488 12th Oct 17, 12:03 PM
    • 3Posts
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    mickw488
    What is "Date of leaving" in GMP escalation calculations?
    • #1
    • 12th Oct 17, 12:03 PM
    What is "Date of leaving" in GMP escalation calculations? 12th Oct 17 at 12:03 PM
    Hi,

    I was employed by the same company from 1992 to 2010.
    Throughout this time I was contracted out of SERPS/S2P.
    The pension scheme had two tiers : Money Purchase (DC), and Final Salary (DB).
    From 1992 to 1997 I was in the Money Purchase tier and then from 1997 until I left the company in 2010 I was in the Final Salary tier.

    I recently received a letter telling me that there is a Guaranteed Minimum Pension associated with the Money Purchase contributions (1992-97). The letter clearly states that this GMP is completely separate from any benefits from the Final Salary tier.
    I was unable to find in any paperwork a figure for the GMP amount so I contacted the pension administrator who will confirm the figures in due course.
    The administrator confirmed that my GMP figure set in 1997 will escalate on a fixed percentage basis.
    The percentage depends on "date of leaving".

    The administrator claims that my date of leaving for escalation calculation will be 2010, when I left the company. This gives 4% escalation.
    I think it should be the date when I left the DC scheme (1997), which would give a 6.25% escalation.
    Compounded up over around 30 years (from 1997, to 2027 when I reach 65) this percentage makes a huge difference (at 4% it'll be 3.2 times 1997 GMP value; at 6.25% it's 6.1 times 1997 GMP).

    So the question is :
    Is the date of leaving for GMP calculation :
    1. The date when I stopped contributing towards the tier which is funding the GMP (1997)
    2. Or is it the date I left the company, and the overall scheme (2010)

    From a logical point of view my thinking is that it should be option 1. above.
    Otherwise, if I'd left the company in 1998, (or resigned for one day and rejoined) I would be in a much better position now although my contribution history from 1992-97 would be identical, which seems grossly unfair.

    Any opinions or personal experience on this issue would be very welcome. If any experts have links to formal rules which define date of leaving I'd be most grateful.

    Many thanks,

    Mike
Page 1
    • xylophone
    • By xylophone 12th Oct 17, 1:27 PM
    • 23,611 Posts
    • 13,748 Thanks
    xylophone
    • #2
    • 12th Oct 17, 1:27 PM
    • #2
    • 12th Oct 17, 1:27 PM
    GMP will not apply to post 97 DB pension - the scheme would have had to satisfy the reference scheme test (the minimum standard of benefits which schemes contracted out on a DB basis from April 1997 had to meet).

    I think it probable that your pension scheme operated on a COMB basis (contracted out mixed benefit), holding one contracting out certificate for both DC and DB elements).

    In both elements of the scheme you were "contracted out" so could be said to have "left contracted out employment" in 2010.

    This may be the reason? Have you asked the Administrators?
    • mickw488
    • By mickw488 12th Oct 17, 2:13 PM
    • 3 Posts
    • 2 Thanks
    mickw488
    • #3
    • 12th Oct 17, 2:13 PM
    • #3
    • 12th Oct 17, 2:13 PM
    Thanks Xylophone for the quick reply.
    One problem I have is that the company no longer exists and the administrators of the scheme (or at least the people I speak to on the phone) are pretty clueless - I usually end up explaining to them about GMP escalations etc, rather than the other way round.
    One thing I found, which may or may not be relevant, is that up to 1997, mixed schemes had separate contracting-out certificates. So I don't know the situation if my GMP was "accrued" while there were separate certificates, and then later the scheme became a single COMB scheme with one certificate? It seems that the timing of my switch, in 1997, makes things more complex...
    Unfortunately I can't find the reference to where I saw this info about separate certificates before 1997.
    Disregarding the above, it does seem unfair that two people, with identical periods of membership and contribution records in the Money Purchase section, end up receiving different GMP benefits if one of them moved into Final Salary in 1997 (which as you say has nothing to do with GMP), and the other left the company and joined some other scheme.
    Of course, this only really an issue for me because the escalation rate is less for 2010 leavers than for 1997 leavers - if it had happened to go the other way then I suppose I wouldn't be so concerned...but it's clearly important for me to ensure things are calculated correctly.


    Incidentally, is there some official body who issues like this can be referred to, or is it ultimately a case of having to accept what the administrators say?
    • xylophone
    • By xylophone 12th Oct 17, 4:54 PM
    • 23,611 Posts
    • 13,748 Thanks
    xylophone
    • #4
    • 12th Oct 17, 4:54 PM
    • #4
    • 12th Oct 17, 4:54 PM
    You might try TPAS.

    https://www.pensionsadvisoryservice.org.uk/
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