Pension at 50 problem

traineepensioner

Hi,

I don't know whether this has any bearing on the GMP issue with your pension but the BT pension scheme was revalued earlier this year. The effect of this revaluation was to increase the actuarial reduction for early retirement for anyone taking their pension benefits after 01/06/11. This has resulted in an additional reduction of between 8 and 2 percent (depending on the age you take early retirement).

The revaluation was to reflect the change from RPI to CPI pension increases and has decreased the amount of additional pension offered for the removal of indexing.

It's possible that the figures that you were initially quoted have also been affected by this "revaluation" and you may need to take a little less pension/lump sum to satisfy the GMP test. It's depressing to realise that BT can still s**t on your pension after you leave the company.

Good luck

Squire_Fulwood

I am only a bystander here and don't know enough to offer advice on this topic but I can't help wondering if your retirement arrangements are set in stone. Is there no room to negotiate?. A lesser lump sum or different pension arrangements. I once worked for BT and did not find them vindictive or difficult. The pension fund officials were also helpful. Would it be possible to ask someone what adjustments could be made to the deal to cause your pension to pass the GMP test. I wish you every good fortune in this.

chipsmum

Thanks to everyone who has offered their expertise so far.

I have spoken to the Pension Advisory service this morning and they have told me to request the calculations used in my estimate last year (for both GMP and the actuarially reduced benefits) along with the current calculations. They will then check both sets of calculations for errors.
They also told me to request a predicted date when my pension benefits would exceed the GMP.
I have sent off an appropriate email and am awaiting the figures.

A couple of questions have occurred to me in the meantime ;

The pension quotes I received last year had 6 options, all of which has supposedly passed the GMP test. The initial pensions on offer ranged from £8848 to £11448 per annum depending on lump sum etc.
Does this mean that GMP calculated last year has to have been less than £8848 or am I being over simplistic ?

Is the GMP figure used for the test today's figure or is it projected to the GMP value at 65 ?

Thanks again for all you help folks. It seems a bit of a minefield but I am learning fast !

Zelazny

The GMP figure used for the test is the figure that the scheme is required to pay you at age 65.

It sounds to me like they didn't bother to do the test when they did the previous calculations.

One thing that might be worth asking about if you really do need to retire early is a step up - this is where the scheme pays you less pension now, but then increases it at age 65 so that your GMP is covered. Not many schemes offer them now, but the rules may permit it.

chipsmum

They definitely told me that they did the test first time round as I have email from pension advisor saying that it was extremely unlikely it would fail this year as there was so much scope in the test results...

traineepensioner

Hi again,

Hope everything goes OK but could you please let us know how you get on

Thanks

chipsmum

Still waiting for the calculations from BT. The chap that needs to do them has been on annual leave but is back today so hopefully some news will follow.

chipsmum

Just a quick update for those that might be interested. I have spoken to the BT pension advisor who is responsible for my case and he now advises that I have passed the GMP but only by a small margin. This is due to new acturial figures introduced in June this year (partly because of change from index linking from RPI to CPI).
I am now awaiting new estimates which I have been told are significantly less than those I received last year.

Zelazny

chipsmum wrote: »

Just a quick update for those that might be interested. I have spoken to the BT pension advisor who is responsible for my case and he now advises that I have passed the GMP but only by a small margin. This is due to new acturial figures introduced in June this year (partly because of change from index linking from RPI to CPI).
I am now awaiting new estimates which I have been told are significantly less than those I received last year.

That seems a little disingenuous to me.

The benefit that you have is DB, and not DC. Thus they are able to calculate the benefit that you would receive at Normal Retirement Age and then apply an Early Retirement Factor to it to determine what you receive for taking the benefits early. There should be no change to the benefits payable at NRA, so any changes to the total payable now would arise from changes to the ERF.

Given that the change from RPI to CPI is likely to mean people receiving less increases once the benefit is in payment, and that if you put the benefit into payment earlier it means more time with less increases, I'd expect the ERF to change such that your benefits for an early retirement would be higher, and not lower.

That said, it is possible that the scheme previously applied ERFs that were significantly better than they should have been and that this has now been corrected, I suppose.

Either way, it doesn't seem all that fair to you

chipsmum

Thanks Zelazny.
You clearly understand this so much better than me. I am not normally this dim about things but pensions seem like a bit of a black art at the moment.
TBH I was so relieved to have mysteriously reached the GMP pass mark since last conversation, that I didn't get too concerned about the figures.
I do not really understand DB and DC or how ERF is calculated. Should I still request a breakdown of all calculations and run them by the Pensions Advisory service ?
I may be naive but assumed that with something as important as pension benefits, they would always be accurate....
Thanks for everyone's help and input so far.