GMP, COD and Single Tier Pension

Billopp

Zagfles

Have you ever thought about why people in your situation who have been contracted out and being allowed to build up single tier even though they have built up basic state pension state second pension and contracted out pension that come to more than the single-tier pension are being allowed to build up extra single-tier pension when a person who has never been contracted out with the same total pension just made up of basic state pension and state second pension is not.

To me this is second dipping as for the years you contracted out both you and your employer received NI rebates. The person who was never contracted out never received NI rebates are being discriminated against. so why do you think a person who is in your situation should build up extra single-tier pension

The only time a person who has been contracted out should be allowed to build up extra state pension is if at the 6 April 2016 the pension they had built up from basic state pension, state second pension and GMP comes to less than the single-tier pension.

The only reason I think that the legislation has been drawn up this way is so it would people who had been contracted out which includes many public service scheme members.

I can now see why you don't want to put in a complaint to the Committee of Public Accounts and that is because you are being allowed to build up single-tier pension for some of the years you were contracted out.

Have you by any chance worked out what your pension entitlement would have been under the current system compared to single-tier.

Another problem with single-tier is that they are being allowed triple lock on say £155 when a person reaching state pension age prior to 6 April 2016 will only receive triple lock on basic state pension currently £115.

Because of this we will have the situation where two people with the same pension entitlement of say basic state pension of £115 and state second pension of £45 who has never been contracted out will receive triple lock on different amounts if one reaches state pension age on 1 April 2016 under current system and the other on 6 April 2016 under single-tier,

The one reaching state pension age on 1 April 2016 will only receive triple lock on basic state pension of £115 and the other who reaches state pension age on 6 April 2016 will receive triple lock on the single-tier pension of £155.

I just can't think why the Government is allowing this to happen. Everyone who has taken their state pension should be treated equally and allowed to receive triple lock on the same amount of pension.

As far as I am aware this has not been mentioned in any newspaper articles.

agarnett

I don't know if this directly or indirectly adds colour to the problem being discussed, but since 6 April 2015 I have routinely received the following formal commentary on the pre-88 GMP element of my private sector contracted out DB pension as part of a requested updated retirement illustration:

GMP pre 6.4.88 - After retirement not subject to an annual increase from the scheme from age 65. Any increases due on this element of your GMP will be provided by the State as part of your State Pension.

Also recently, I have received details of a CETV calculation which shows that the above has resulted in a reduction in CETV of over 20% under a negative line of calculation termed "GMP Savings".

greenglide

Another problem with single-tier is that they are being allowed triple lock on say £155 when a person reaching state pension age prior to 6 April 2016 will only receive triple lock on basic state pension currently £115.

Because of this we will have the situation where two people with the same pension entitlement of say basic state pension of £115 and state second pension of £45 who has never been contracted out will receive triple lock on different amounts if one reaches state pension age on 1 April 2016 under current system and the other on 6 April 2016 under single-tier,

The one reaching state pension age on 1 April 2016 will only receive triple lock on basic state pension of £115 and the other who reaches state pension age on 6 April 2016 will receive triple lock on the single-tier pension of £155.

I just can't think why the Government is allowing this to happen. Everyone who has taken their state pension should be treated equally and allowed to receive triple lock on the same amount of pension.

As far as I am aware this has not been mentioned in any newspaper articles.

"We" have known that for a long time, along with the really nasty one - a person who has 9 years contributions (for whatever reason) with an SPa date of 5/4/2016 gets 9/30s of £113 (or whatever it is now) while if their SPa date is 6/4/2016 they get nothing as the minimum qualifying period (MQP) of ten years applies to almost everyone!

The triple lock issue has been known for some time.

Why should the press suddenly publicise this now? Was it not their "job" to understand the changes and publicise them when they were going through parliament? It is a bit late now.

Lots of people knew, politicians and press "chose" not to understand what was fairly simple in the legislation.

zagfles

Billopp wrote: »

Zagfles

Have you ever thought about why people in your situation who have been contracted out and being allowed to build up single tier even though they have built up basic state pension state second pension and contracted out pension that come to more than the single-tier pension are being allowed to build up extra single-tier pension when a person who has never been contracted out with the same total pension just made up of basic state pension and state second pension is not.

To me this is second dipping as for the years you contracted out both you and your employer received NI rebates. The person who was never contracted out never received NI rebates are being discriminated against. so why do you think a person who is in your situation should build up extra single-tier pension

That's exactly the point I've made several times in this thread! It's those who've been contracted in who are (in the main) discriminated against. In comparison the GMP indexation issue is trivial.

The only time a person who has been contracted out should be allowed to build up extra state pension is if at the 6 April 2016 the pension they had built up from basic state pension, state second pension and GMP comes to less than the single-tier pension.

That would seem reasonable. But it's not how single tier works.

The only reason I think that the legislation has been drawn up this way is so it would people who had been contracted out which includes many public service scheme members.

I can now see why you don't want to put in a complaint to the Committee of Public Accounts and that is because you are being allowed to build up single-tier pension for some of the years you were contracted out.

At last! Yes,, like I've said several times, single tier benefits me despite losing GMP indexation.

Have you by any chance worked out what your pension entitlement would have been under the current system compared to single-tier.

Earlier in this thread. Well I worked out the accrual difference anyway.

Another problem with single-tier is that they are being allowed triple lock on say £155 when a person reaching state pension age prior to 6 April 2016 will only receive triple lock on basic state pension currently £115.

Because of this we will have the situation where two people with the same pension entitlement of say basic state pension of £115 and state second pension of £45 who has never been contracted out will receive triple lock on different amounts if one reaches state pension age on 1 April 2016 under current system and the other on 6 April 2016 under single-tier,

The one reaching state pension age on 1 April 2016 will only receive triple lock on basic state pension of £115 and the other who reaches state pension age on 6 April 2016 will receive triple lock on the single-tier pension of £155.

That's nothing. Take the example of two people who've been self-employed all their working lives. It's not just indexation that's the difference, it's the full difference in pension between basic and single tier! About £40pw difference for the rest of their lives!

I just can't think why the Government is allowing this to happen. Everyone who has taken their state pension should be treated equally and allowed to receive triple lock on the same amount of pension.

As far as I am aware this has not been mentioned in any newspaper articles.

It was definitely discussed here in the very long thread we had about single tier. See, all these unfairnesses are starting to make the GMP indexation issue look insignificant. But it's not like the first time this has happened, it was similar in the 2010 changes when suddenly only 30 years were needed for basic state pension instead of 44 or so, HRP became credits etc. Loads of unfair anomilies and cliff-edges.

zagfles

greenglide wrote: »

"We" have known that for a long time, along with the really nasty one - a person who has 9 years contributions (for whatever reason) with an SPa date of 5/4/2016 gets 9/30s of £113 (or whatever it is now) while if their SPa date is 6/4/2016 they get nothing as the minimum qualifying period (MQP) of ten years applies to almost everyone!

Really? That's a new one on me. Surely the person with 9 years would have a foundation amount of whatever their entitlement was under the old system, which would then apply as it would be greater than the amount under the new rules?

zagfles

agarnett wrote: »

I don't know if this directly or indirectly adds colour to the problem being discussed, but since 6 April 2015 I have routinely received the following formal commentary on the pre-88 GMP element of my private sector contracted out DB pension as part of a requested updated retirement illustration:

GMP pre 6.4.88 - After retirement not subject to an annual increase from the scheme from age 65. Any increases due on this element of your GMP will be provided by the State as part of your State Pension.

Well they'll have to drop the second sentence next year. In fact they should have dropped it now as I think all the legislation has gone through.

Billopp

Greenslide


Ten year rule.

You mention 9/30 of what is the basic state pension. Another thing to remember the person may also have 9 years of state second pension which will also be lost.

Prior to not having a minimum number of years the basic state used to have a 10 or 11 year minimum number of years for basic state pension depending on if you were a man or woman respectively.

There was never a minimum for state second pension so this is really nasty change without much warning especially as they have been paying full NI where it does not effect a person who was contracted out with less than ten years pension as they will keep the pension bought by their employers NI rebate and keep their own rebate during that time.

Some people would have also been in a money purchase rebate only policies that I think ceased in 2002 who will keep their pension policies.


Has anyone thought about non payment of increases on rebate only policies which ceased in 2002 as I believe they also received cost of living increases on their rebate only policies via their state pension after they reached state pension age which I think ceased being paid to people reaching state pension after 2002 when these rebate policies ceased.

I assume the people who reached state pension age prior to 2002 still receive cost of living increases on their contracted out pensions with their state pension.

xylophone

Really? That's a new one on me. Surely the person with 9 years would have a foundation amount of whatever their entitlement was under the old system, which would then apply as it would be greater than the amount under the new rules?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

"I reach State Pension age after 6 April 2016


• If you reach State Pension age after the new scheme starts your state pension
will be based on the single-tier scheme. The contributions on your National
Insurance record under the current system will count towards your single-tier
pension. As long as you satisfy the minimum qualifying year requirement you will
get a single-tier pension no lower than the valuation of these contributions."

zagfles

xylophone wrote: »

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

"I reach State Pension age after 6 April 2016


• If you reach State Pension age after the new scheme starts your state pension
will be based on the single-tier scheme. The contributions on your National
Insurance record under the current system will count towards your single-tier
pension. As long as you satisfy the minimum qualifying year requirement you will
get a single-tier pension no lower than the valuation of these contributions."

Well that's an aspect that's passed me by - but aside from any unfairness this seems to go against the whole "simplicity" reasoning behind all the other anomilies in single tier, such as GMP indexation and the different treatment of those who've been contracted out and in.

The white paper clearly states:

In addition, valuing qualifying years to the point that the single-tier pension is implemented means that all the complexity linked to people’s pre-implementation National Insurance records is removed. All the elements of an individual’s contribution history will be consolidated into a single amount – the foundation amount – which will be the starting point for the much simpler single-tier system.

So, is the white paper wrong? As well as the foundation amount, the number of qualifying years under the old scheme is needed, ie two amounts, not one as stated above?

The foundation amount won't necessarily be proportional to the qualifying years, as people will have different ASP amounts and some people will have been contracted out.

Or is it that the foundation amount is converted into qualifying years, eg foundation amount £40 equals 9.03 qualifying years (50/155*35)?

In which case someone with 9 qualifying years under the old scheme could have more than 9 years under the new scheme (if they have a lot of ASP) or less (if they were contracted out).

Something is wrong with this picture!

Billopp

Zagfles

"That's nothing. Take the example of two people who've been self-employed all their working lives. It's not just indexation that's the difference, it's the full difference in pension between basic and single tier! About £40pw difference for the rest of their lives!"

I agree , they also receive triple lock on £155 making it even more generous. It might not be as generous as you think as I doubt if many self employed people have spent all their life as self employed. They may also have to have a increase in NI.


"Well they'll have to drop the second sentence next year. In fact they should have dropped it now as I think all the legislation has gone through."

I agree, the only trouble is Steve Webb and the DWP deny that they are responsible for paying GMP increases even though most of their web sites and booklets said they did.

They should also be making arrangements for all pension scheme booklets to to incorporate different wording that does not mention GMP increases paid with state pension including their own which is administered by The Cabinet Office.

I get the feeling they don't want to do it as it will bring to every ones attention that the single-tier does not pay increases on GMPs.

"these unfairnesses are starting to make the GMP indexation issue look insignificant."

When I reached state pension age in 2005 I started off with a GMP of £6.45 pw which became £27.16 pw after nine years of increases , An increase of over £20 pw that people reaching state pension age under single-tier will not receive.