GMP and lump sum question

TableTop

I find it really difficult to understand the rules around contracted out contributions and GMP in defined benefit schemes. I've read the discussions on this forum and thought I 'kind-of' understood it, but I've just thought of an aspect which I dont understand, and hope there may be an expert out there who knows the answer.

I have a deferred defined benefit pension with a major corporation which I am due to take in 2013 when I am 60. Two possible options would be:

Scenario 1: Take maximum pension and no lump sum. Pre-1997 GMP accounts for around 17% of the total, so I know that when I reach state pension age 17% will probably not be increased annually and will remain level.

Scenario 2: Take minimum pension and maximum lump sum - assume for this question that it represents 25% of the nominal pot (I am aware that there is no real pot). So 75% of the original 'pot' pays an annual annuity.

My question: is the GMP element reduced by 25% as well? OR does the original GMP element stay the same in actual terms, no matter how much lump sum is taken?

i.e. replacing percentages with cash and simplifying:

Scenario 1 at State Pension age I receive £100, made up of:
£17 - level (GMP)
£83 - increasing by inflation according to scheme rules

Scenario 2a at State Pension age I receive £75 made up of:
£17 - level (GMP)
£58 - increasing by inflation according to scheme rules
OR
Scenario 2b at State Pension age I receive £75 made up of:
£12.75 - level (GMP)
£62.25 - increasing by inflation according to scheme rules

I'd like to get this clear in my mind before committing to the final decision re lump sum vs annual payment.

Thanks

TableTop

Hi, just before anyone asks or comments -
I'm taking the pension at 60 but my state pension age is 64. Between 60 and 64 all the pension will all be increased at the same rate.
My question relates to what happens after SPA.

I've used simplified numbers as its the principle that I'm trying to understand.

xylophone

http://dl.dropbox.com/u/452108/20110217094333898.pdf
Have you read the above?
http://www.pensionsandannuities.co.uk/Tax_Free_Cash_And_Pension_Lump_Sum.htm
http://www.barnett-waddingham.co.uk/news/2012/07/what-is-commutation/
You will see that except in certain very strictly defined circumstances, lump sum benefits cannot be taken from the gmp - see also http://www.opalliance.org.uk/increases.htm but for RPI read CPI in the case of statutory increases. Your scheme might still be using RPI for the balance but you need to check with the Scheme administrators who should also be able to answer all your questions relating to your pension.

TableTop

Thanks Xylophone, thats a bit more of the puzzle filled in.

TT