Pension at 50 problem

chipsmum

Last year I was "encouraged" to accept a voluntary redundancy offer after 32 years with my company.
Before deciding to leave, I made enquiries about the impact on my final salary pension. I was advised that I could opt to receive a reduced pension from age 50 onwards. I received estimates for the various pension options available and opted for maximum lump sum and a part increasing/part fixed annual pension.
This equated to a lump sum of around £65k and a pension of around £10k per annum.
I am now 3 months from my 50th birthday and have just contacted the pension trustees to ensure that everything is in place.
They have replied saying that I will not be able to claim my pension at age 50 as my estimate has failed the GMP test (guaranteed minimum pension).
I am absolutely frantic with worry as all my financial planning has been based on my pension being available before the end of this year. My husband is currently out of work and I am studying for a degree to allow me to commence a new career plus working as many hours as I can every week for just over minimum wage.
I have been physically sick receiving the response from the pension trustees yesterday as I will not be able to keep my home if I don't receive the pension I was expecting. I will have to give up all hopes of a new career and probably spend the next few years in rented accommodation.
Is there anything I can do that will allow me to receive the pension that I was promised ?

JoeCrystal

Any chance it is with NHS, I did quick check and came across this

Guaranteed Minimum Pension (GMP)Test Factsheet

chipsmum

It's BT, not NHS but think same rules apply.
The part I don't understand is how my estimate met GMP criteria last year but now doesn't.

JoeCrystal

I have no idea on that part but it may be worth asking them for more detailed explanation. One other possibility is the fact the age of when you can take the pension gone up to 55 from age of 50. That was effective from April 2010. There are still few protected schemes which allows retirement at 50 though.

jem16

chipsmum wrote: »

Is there anything I can do that will allow me to receive the pension that I was promised ?

Have you anything in writing that says you can definitely take the pension at age 50 other than just estimates?

Unfortunately without this I don't think you have a case to get it paid. The Trustees have the final say on whether or not the pension can be taken early and will only grant it if it meets the GMP test. If it fails this test, they cannot give you the pension as it would be detrimental to all the other pension holders.

jem16

chipsmum wrote: »

It's BT, not NHS but think same rules apply.
The part I don't understand is how my estimate met GMP criteria last year but now doesn't.

Perhaps the GMP wasn't actually checked at that point?

chipsmum

As well as the estimates, I have verbal and email confimation from three different people within HR and Pension services.
Before leaving the company, I submitted my request for my preferred pension option at 50 via the online application process. I also have confirmation that this was accepted.

I appreciate that estimates are subject to change but am at a loss to understand how this has happened.

jem16

chipsmum wrote: »

As well as the estimates, I have verbal and email confimation from three different people within HR and Pension services.
Before leaving the company, I submitted my request for my preferred pension option at 50 via the online application process. I also have confirmation that this was accepted.

Certainly worth asking for an explanation then as you have obviously based your decision on this acceptance.

I appreciate that estimates are subject to change but am at a loss to understand how this has happened.

The GMP has to be revalued each tax year.

Perhaps this could help explain it?

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/revaluation

chipsmum

Yes, will be contacting them first thing tomorrow morning. I believe GMP is reviewed every April but I am not certain.
I have absolutely no idea how the calculations are done but was hoping someone on here might know and be able to tell me whether there could have been a significant change in the last 12 months which is now causing my pension to have dropped below the pass mark.

kidmugsy

It seems to me that you've been badly treated. Consider e-mailing "Jessica" at the Daily Telegraph: she does a fine job of helping people sort out financial difficulties. I'd recommend that you consult your Union, except that the Union I used to belong to never said or did anything intelligent about our pensions.

numbermonkey

GMP is an element of your pension that accrued while you were in service between 1978 and 1997. It is calculated based on a horrendously complicated formula, but the amount is broadly linked to your core National Insurance earnings and your expected working lifetime. For females, it comes into payment at 60 and the pension scheme has to pay the amount calculated at 60.

I'm assuming your pension is reduced for early retirement. The pension scheme does a test to make sure that your early retirement pension accrued before 1997 is sufficient to pay the GMP at age 60, which is why under some scheme rules the scheme can stop you taking early retirement.

As to what you can do:
- Ask the Scheme's administrator for a detailed breakdown of your early retirement pension, why you fail the GMP test and details of the GMP test calculation. If you have received an earlier quote, as for the same breakdown for this. There could just be an error made somewhere along the line - they should pick this up in their response. You might also want to consider sending a copy of this letter to the chair of the pension scheme trustees, as (s)he will be keen to resolve the situation quickly.
- Talk to The Pensions Advisory Service - get them to talk you through the quotes and understand what's going on. If they think something doesn't look right, they'll be able to spot it. But they'll probably need the information above first.
- It is possible that opting for the maximum tax free cash is reducing your pension enough to cause the GMP test to fail. Would you rather retire with a lower (or no) lump sum or wait until you pass the GMP test? Now might be a time to think about this (obviously taking proper financial advice) and perhaps asking the administrators for quotes without tax free cash (or at least the maximum possible where you still pass the GMP test).

For what it's worth (I have worked in the pensions industry for the last 5 years or so), £10k feels like quite a large pension to be failing a GMP test - although you can only restrict the part that was 'earned' before 1997 - and people who fail these tests tend to have left service further back in time. But I can also see circumstances where one could fail the GMP test, especially with a heavily reduced pension. Get some more information and find an expert to help you out.

NM