GMP, COD and Single Tier Pension

Billopp

Hi ijustworry,

How far away are you from state pension age?

As you are effected, the only thing I can think of at the moment is to write to Steve Webb via your MP telling him that you have seen the a article on the web by NEASA MCERLEAN in The Independent Newspaper dated 11 January 2014 mentioning that GMP increase included in the state second pension will no longer be payable after the single tier pension starts on 6 April 2016 for people reaching state pension date after that date.

Ask him to explain why this is going to happen when your pension scheme booklet says that Pre 1988 GMP and post 1988 GMP increase in excess of 3% will be paid by the DWP/State. (Have a look at your pension scheme booklet to see if this is what it states will happen)

He will most probably write back and say the Government does not pay increases. This is not true as every pension booklet in the land for a contracted out pension will say what yours shows as well as Government web sites mentioned in the earlier threads which prove what he is saying is not the truth.

You should also mention it to any other people you know in the same situation as you and also get them to write to Steve Webb via their MPs.

I am in regular contact with someone in the same situation as you who reaches state pension age three weeks after the single-tier pension starts. He is in the process of sending Steve Webb another letter via his MP as he was not satisfied with his reply stating that DWP don't pay GMP increase when his pension scheme booklet says they do. He told me he stands to loose about £17,000 because of the non payment of GMP increases after he reaches state pension age.

xylophone

He will most probably write back and say the Government does not pay increases.

What happens under existing arrangements is well explained here

http://s04.static-shell.com/content/dam/shell/static/pensions/downloads/gmp-factsheet.pdf (a private company scheme).

and here http://www.yourpension.org.uk/Files/Files/6.%20Bexley%20GMPGuide240211.pdf (a public service scheme).

OP, were you in a contracted out Defined Benefit/Final Salary Pension Scheme between 1978 and 1997?

Billopp

Hi xylophone,

Yes, I was in a contracted out scheme from 1978 to 1997. I took early retirement February 1997 and received state pension in 2005.Your two attachments and every other pension booklet in the land state GMP increases paid by the state.

I just can't understand why Steve Webb states DWP don't pay GMP increases which he confirmed in a House Of Commons reply to put to him about GMPs by Teresa Pearce MP. He said The Department of Works and Pensions does not pay increases on Guaranteed Minimum Pension (GMP).

Both you and I know that this is not correct. You can find this on WEB site They Work For You. His reply was on 6 January 2004. He and the DWP have said this in letters to me.

Billopp

A further thing for everyone on this thread to think about is how current pensioners are going to be treated compared to someone who retires after the single-tier starts.

With two people in state second pension i.e not contracted out with say a full basic pension of £110 pa and state second pension of £40 pa

The first retiring on 1 April 2006 prior to single tier will they only be able to receive triple lock on basic pension of £110 and CPI on
any extra ie £40 pa state second pension.

The second retiring on 10 April 2016, according to what is going to happen under single tier they will be entitled to triple lock on first £144 pa and CPI on balance of £6 pa. Because of this the person reaching state pension age after single tier will end up receiving a much larger pension by the time they die than the person who reached state pension age prior to 6 April 2016.

I have not seen this mentioned by the government or any publication , do any of you think current pensioners will be allowed to have triple lock on first £144 after single tier starts.

If this does happen that they allow £144 at triple lock then it could have a knock on effect on GMPs for people on pension prior to 2016 as if they allowed it for a person who was never contracted out would they then have to let the calculation of increases on GMPs worked out at triple lock on first £144 and balance say at CPI which is bound to give a much higher pension over time.

If they don't allow current pensioners to benefit from triple lock then they are being discriminated against.

I would like other peoples thoughts on the subject.

Martin51

The Government's handling of the Guaranteed Minimum Pension (GMP) rights under the New State Pension (NSP) rules is completely shocking!

Let me explain. Under the NSP rules, those who worked in a contracted-out final salary scheme at some point during the 1978-1997 SERPS' era and who reach State Pension Age (SPA) after 6 April 2016 will find that they will lose any State-sponsored inflation protected as depicted by the scheme rules which were broadly the same across both private and public sector schemes.

In order for the Government to sweep in simplified rules without delay it brush-stroked (removed!) protective rules put in place to ring-fence an element of pension, called the GMP. Let's be clear! The idea of the GMP was to ensure that those who contracted out did not lose out compared with those who did not. The Government encouraged employers and their employees to contract out in order to pass the bureaucracy from the State to those companies .

There have been many postings about this on the forums already, but I feel compelled to post my own deep frustration and ANGER at the Government's dismissive attitude of protected rights.

If you reach SPA after the NSP then you will lose the most valuable protective element of your whole pension -- the GMP State-sponsored inflation increases. Do not dismiss this lightly. If inflation soars, then this will whittle away your GMP rapidly.

Because of the Government's actions, those affected will be DISCRIMINATED against. This should be illegal! You were PROMISED parity with the Additional State Pension (ASP) when you were contracted out of SERPS.

And there's a potential double-dose of discrimination here: rumour has it that those in the public sector will likely find that their schemes will take over the responsibility for the increases while those in the private sector are likely to be left high and dry! And who will be paying for the public sector increases? The State -- so nothing changes. Private sector employers and employees should feel short-changed.

Imagine if you purchased a pension product that promised a guaranteed pension with inflation protection upon maturity and then you found out that the inflation protection had been removed. The FCA would likely fine the seller for mis-selling. So what about the GMP and the Government?

I would urge those affected to PROTEST, PROTEST, PROTEST, ... to their MPS via WriteToThem.

Who would be prepared to join me in a more formal protest to Government?

This is important. When a Government promises protection to pensioners on the one hand but seems perfectly content to remove cast-iron benefits from an innocent group of nearly pensioners on the other hand, then what can future seniors expect?

Don't be apathetic! If Government can't be trusted to uphold a promise made to you years ago, then it simply cannot be trusted to uphold any future protective legislation ... of ANY kind!

zagfles

The problem here is that it's a very narrow group of people who are going to lose out overall. I've been in a contracted out private sector scheme most of my working life and overall, the single tier is hugely beneficial to me, compared to if I'd been contracted in.

Generally anyone with a few years of working life to go after 2016 will be better off having been contracted out than contracted in, since those contracted out who already have 35 years NI record will be able to build further state pension, those contracted in won't. This is much more significant than the GMP indexation issue.

Also, as I said above, there will be those contacted out who gain from the GMP indexation issue such as those who have deferred benefits with a high fixed revaluation during deferrment, which under single tier will continue without the current corresponding reduction in additional state pension.

The losers from the GMP indexation issue are those who will reach SPA in the year or two after April 2016. Those people certainly have been discriminated against, the problem is it's quite a small group and the issue is far too complicated for most people to understand...

xylophone

it's quite a small group

And how many people are in that "small group"?

Unless the Scheme picks up the tab, there will be no index linking on the part of their occupational pension that represents pre 88 GMP and only up to 3% on the part that represents post 88 GMP, despite the fact that their state pension has been reduced to take account of contracting out.

This is plainly unjust.

As for people not understanding the problem, I think you are entirely correct - these unfortunates will only realise what has happened when it comes time for the first increase on their occupational pension after state pension age.

I wonder how many scheme pension booklets have been updated to reflect the change?

zagfles

xylophone wrote: »

And how many people are in that "small group"?

Unless the Scheme picks up the tab, there will be no index linking on the part of their occupational pension that represents pre 88 GMP and only up to 3% on the part that represents post 88 GMP, despite the fact that their state pension has been reduced to take account of contracting out.

This is plainly unjust.

Agreed. The problem is you'll likely hear far more whinging from people for whom the single tier is hugely beneficial, such as public sector workers with a good few years till pension age who will whine about their NI going up 1.4%. Which is very cheap for the extra state pension it'll give them.

As for people not understanding the problem, I think you are entirely correct - these unfortunates will only realise what has happened when it comes time for the first increase on their occupational pension after state pension age.

Will they even realise then? Currently they'd get a bit extra in their state pension, and some people, under current rules, wouldn't get any increase for a few years because their additional state pension is negative as explained earlier in the thread...

walter_wobblebottom

Where is the old booklet that had the info?

Billopp

Martin 51

Hi glad to see your posting and knowledge about the loss of GMP increases.

As it happens I wrote to the Committee of Public accounts earlier this year about stopping of GMP indexation increases on GMP when new state pension starts. I mentioned that it was being done without telling anyone about loss of the benefit.

I received a very interesting reply from Margaret Hodge MP Chair of the Committee of Public Accounts on the 25 March 2015.

I have never been able to get Steve Webb or the DWP to admit that the state paid some or all of the increases on a persons GMP.

Here are some of the interesting sections from her reply where she had got the National Audit Office (NAO) to look into it.

Under current arrangements there are scenarios where the DWP funds, or part funds GMP indexation increases earned between 1978 1nd 1997.

Recipients will lose indexation increases on GMP increases accrued between 1978 and 1997. This is the first time I have seen it confirmed by Parliament that people will lose GMP increases when the single tier pension starts.

The NAO has noted there are no details of scenarios published in which an individual would receive less pension following the move to New State Pension, and that there are no scenario published that reflect the potential impact of the removal of GMP indexation increases on contracted- out pensions.

Again this is the first time a Government organisation has confirmed the DWP/State are not telling people about removal of GMP increases.


The NAO has recommended to DWP that it publish additional, clear information and guidance regarding scenarios in which individuals could lose out following the move to the new state pension. The DWP has agreed to review the information publicly available on this area etc.

I now feel that I am getting somewhere with my correspondence with the DWP who have just refused to admit the state pays GMP increases and that is why the cold not tell anyone that they would lose their GMP increases.

As soon as the election has finished and a new Committee is formed I will be chasing them to find out what the scenarios are and how the DWP are going to bring to the attention of the public that they won't receive GMP increases if they reach state pension age on and after 6 April 2016.

Like you I have been frustrated by their replies and would be prepared to join in in a formal protest to the Government.

I have a friend who has put in a complaint to the Parliamentary Ombudsman about the removal of GMP increases and is still waiting for the result of their investigation.