gmp in pensions

adrob

Hi, would appreciate any help offered on what seems an impossible mixture of pension rules.
I have an old company pension (ceased trading) pension now run by prudential. It is a very well funded scheme with no money worries.

In this scheme you have the right to retire at 50.
On enquiring to the pru about retirement they inform me that i will not be able to till 60 because of inadiqate gmp even though they say i will receive a pension at 65 of around £7000 off only 4years payments.it makes no sense to me i have alot of money in this pension considering the short period of contributions,

Best of it is they transfer valued it at £45000 in march and now in december at £54000 a 20% increase of funds in 9 months but the earliest payout remains the same ?

are they getting me at it!
surely the gmp requirement is a factor of the years i was contracted out so why they promising me so much when they will payout but cant get a lump sum earlier and a smaller amount, I have paid into state pension before this period and after

xylophone

As I understand it, you are not allowed to take benefits until the fund is large enough to purchase a pension at least equal to the revalued gmp at age 60 for females and 65 for males?

This is extensively discussed here https://forums.moneysavingexpert.com/discussion/1439747

dunstonh

On enquiring to the pru about retirement they inform me that i will not be able to till 60 because of inadiqate gmp even though they say i will receive a pension at 65 of around £7000 off only 4years payments.it makes no sense to me i have alot of money in this pension considering the short period of contributions,

That is not uncommon. If the investment returns have not been sufficient to cove the GMP, then the insurer can first refuse to pay out a tax free cash payment or keep the terms strictly to the selected retirement date.

It doesnt stop you transferring it and commencing it that way. However, given the fact the fund doesnt cover the GMP, its unlikely to be the best option (probably by a long way)

est of it is they transfer valued it at £45000 in march and now in december at £54000 a 20% increase of funds in 9 months but the earliest payout remains the same ?

The two things are not linked unless the GMP can be covered.

surely the gmp requirement is a factor of the years i was contracted out so why they promising me so much when they will payout but cant get a lump sum earlier and a smaller amount, I have paid into state pension before this period and after

Pru agreed to pay you the GMP on the selected retirement date of 60. Irrespective of the fund value, they will have to do this. So, if investment returns have failed to hit what was planned, Pru still have to pay you the GMP. However, the terms were set to 60. They do not have to pay it earlier unless the fund value is sufficient to achieve that. It isnt, so they are not.

I have an old company pension (ceased trading) pension now run by prudential. It is a very well funded scheme with no money worries.

Prudential have no money worries but level of funding doenst matter to you. Investment returns matter and that is your problem.

adrob

My deal is with my old employers pension scheme not the pru, they just run the show now.
They have told me that the rules that i had with my employers still apply and the only one i currently know of says i can retire any time from age 50.
thing is what level of pension do they have to guarantee to meet gmp requirement? they havent told me
they did quote me a figure i could retire on at 60 and another at 65. BUT if my pension has risen by 20% in 9 months then why are they not quoting me an earliest age of say 58 now or what ever?
Surely if you are lucky enough to have huge gains in value in your fund then the gmp coverage just got a whole lot better.
Other snag is if i transfer to another fund then i lose the 50 year old clause and am stuck with the government new age restriction of 55
My position is that i have a new life lined up abroad that just requires a nice tax free lump sum now to realise, the future pension is just a side line bonus then really does not matter in monetary amount.
I cant see i would have got much of a government pension off 4 years contributions and as i understand it thats what the gmp is supposed to make up for?

adrob

In addition to the above, having read some stuff on another forum, my fund consists of £25000 in respect of gmp and £30000 in respect of excesses so this is far from a mainly gmp fund.
The pru say the 30000 dont come into it because of "anti-franking" so loads of extra moneys gone in but the gmp stands to stop early retirement. is there any logic to any of this, whats the point of working hard only to be told you still dont get get any say in the rest of your life

dunstonh

My deal is with my old employers pension scheme not the pru, they just run the show now.

So, do you have a defined benefit pension scheme or a section 32 buy out bond?

Defined benefit schemes do not have fund values.

xylophone

http://www.hmrc.gov.uk/pdfs/nico/ca14.pdf
Anti franking details on page 48 (7.1)

adrob

Honestly dont know what bracket the pension is in,
i know the fund is mostly invested in a deferred annuity at the pru.
The loose change still being controlled by the trustees.
And the pension scheme is closed to new members and will gradually wind up

xylophone

It seems to me that your best bet would be to ask the Pru for a detailed explanation (in writing) of your entitlements under the deferred annuity contract.
I am guessing that they will be saying something along the following lines:

The company scheme of which you were a deferred member is in wind up. The Trustees have transferred your deferred pension to a deferred annuity with the Pru. You have a right to a Guaranteed Minimum pension (revalued in deferment) which must be paid to you at 60/65.
While the Scheme permitted members to take pension benefits (presumably actuarially reduced?) at age 50, this would not have been permitted if the gmp liability had not been covered.

You are not permitted to take benefits now because there would not then be sufficient to ensure that you could be paid the revalued gmp at 60/65.

Anti franking legislation prohibits funding the statutory indexation of the gmp from the excess to which you refer.

Or something of the sort? Anyway, make the Pru work for their living and give you an explanation you understand.

adrob

I have now had a meeting with a finacial advisor and he has read the correspondance that i have had from the pru.

Evidently it is a defined benefit scheme and he says the transfer value is way low in comparison to the age 60 or 65 offer, and he puts down the 20% increase in transfer value to the fact that they would rather get me to transfer than to pay me out for the amount that my pension would be.

At time of leaving the gmp side of the pension amounted to £274.04 per annum increasing at 7.5% i was age 29 at this time so what would that make the gmp at 65 i came to a figure of £3444.
pru have a figure of £3204

At time of leaving money in excess of gmp was £741 growing at rpi to max 5% no idea where that would get to but pru total pension forecast is £5800 at 65

seems to me that there is no way that 4.5 years of government pension would pay out £3444 or even £3204

adrob

The advice of the financial advisor is that i would take a huge hit at the offered transfer value, is it possible to argue for a more realistic transfer value or is it a case of take it or leave it?