We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
GMP, COD and Single Tier Pension
Options
Comments
-
Yes, this is complex, which is why Government aims to bamboozle us by wihdrawing our protected rights by stealth.
Certainly those in the private sector who reach the New State Pension (NSP) within the first few years are most affected but contracting out is only being abolished from 6 April 2016, which means those who were contracted out right up to the deadline will be impacted and therefore won't accrue any/little benefits under the NSP rules. But the issue here is those who were contracted out at some/most/all point during SERPS. They were supposed to have built up protective rights.
We don't know the true numbers, but it's likely to be more than some people are saying. And don't forget that the impact will be to a greater or lesser extent according to individual status. Even a negative impact on a small number of people still counts as discrimination if their rights have been compromised!
In fact there are two counts of discrimination being suffered by the private sector: 1) against those who were better off by contracting in; 2) against those in the public sector whose schemes will likely take over the inflation protection.
As for 2), there is no impact to the taxpayer from the public sector viewpoint (because either the DWP or another Government department pays -- it's all State cash) whereas the Government saves by not paying the inflation-proofing on private sector pensions -- effectively a stealth tax!
But the main point is that Government has reneged on a promise and is prepared to shaft those in the private sector and a time for those folk who cannot make up the loss.
Shameful, disgraceful ... mis-selling?!
If a thousand people had bought a personal pension and 990 had bought 'as it says on the tin' products and only 10 were mis-sold, would those 10 unfortunates not have a case against the product sellers?0 -
Hi Billopp,
Very interesting posting, thanks!
Yes, let's get together on this. The more support, the better. I too have written to, and been frustrated by, DWP (Steve Webb).
I am energized that you and a friend, like me, not only want to know how Government feel justified in removing GMP protection BUT also I want this restored -- we are owed these rights, and we want them reinstated.0 -
Possibly the most impressive and at once worrying thread I have ever seen on MSE.
I have seen no statistics, but my gut feeling is that most private sector employees retire well before SPA, perhaps largely because most are psychologically ill-equipped to survive in the ruthless and age discriminating work environments more frequently found there than in the public sector.
Thus suggestion of long term contracted out being able to continue working and building increased NSP may be flawed.
Large numbers of us were in contracted out arrangements between 1978 and 1997. For the first ten years it was only those of us in DB schemes but the government went overboard to promote it in a very poorly controlled way at the time of the financial services Big Bang which most have forgotten.
I changed employer in 1989 and went into a contracted out DC arrangement. I was, as part of the government's haphazard promotion, given rebated NI credits for a retrospective 2 years (to April 1987) as an incentive to start my SERPs policy. Yet that same two years I was in a contracted out DB scheme.
That DB scheme still exists and has offered a CETV currently.
Having read this thread, I am now concerned that as awareness now grows, private sector DB Schemes may abdicate GMP completely and current CETVs and open market options will plummet.
Is this a logical conclusion of what is revealed so clearly in this thread?0 -
Does it mention the details the OP means in this NP46 2004 booklet?
http://collections.europarchive.org/tna/20050301192907/thepensionservice.gov.uk/pdf/np46/np46-retirement-apr04.pdf0 -
Does it mention the details the OP means in this NP46 2004 booklet?
Yes - page 51 ff.
See also links in post 23.0 -
zagflies
I don't know what your definition of a small group is! As far as I can see it will effect anyone who was contracted out up to April 1997 so if the person was young the last person who has a GMP will reach state pension age about 2035. The last person to have a full GMP from when it started in 1978 to 1997 would be reaching state pension age 2020-25 depending on what age they were when they joined the occupational pension scheme . It must be several million people. Some could have a potential loss of up to about £20,000.
Have a look at the article " Losers who never knew in switch to single-tier pension" in the Saturday Independent dated 10 January 2014 by Neasa MacErlean
Are you sure the scheme is beneficial to you. I think you will gain about £1.10 to £1,15 week under single tier pension and will loose 1,4% NI rebate,Loose GMP increases and the other loss could be that your future accrual rate in your pension scheme will go from 60 ths to 70 ths as the employer will lose their rebate of 3.4%.
Say a person was earning £30,000 a year and had 40 years service they would expect to receive £20,000 a year pension from their occupational pension scheme.
If the say were age 60 at and had another five years to go to receive full pension
they would receive 35/ 60ths times £30,000 =£17,500
5/70ths times £30,000 = £2,142
Revised pension of £19642 from the occupational scheme due to future accrual of 70ths due to employer loosing 3.4% NI rebate
A loss of £358 a year divided by 52 weeks making it a loss of about £6.88 a week for a gain of about the same amount by being able to accrue another five years of state pension under single-tier pension.
So as you will see if you also take into account loss of GMP increases and higher NI you will most probably be worse off than under the existing arrangements.
I have assumed that your pension scheme will go from 60ths to 70ths for future service as that is what people in the pension industry say is going to happen. Have also assumed your scheme will not pick up the cost of GMP increases normally paid by the DWP.
The worst scenario is that they could close down your scheme as final salary and change it to a defined contribution for future service.
There seems to be lack of information about what is going to happen to non public service schemes when single-tier pension starts.
Anyone in a public service is lucky as their pension schemes can't be changed for 25 years so they will not have their future service reduced as it is likely to be in the private sector.
The only loss to the public sector may have is loss to GMP increases paid by the DWP but they can earn extra pension from the state under single-tier if they are still working.
As far as I am aware all public service schemes have a occupational pension age of 60 so most of them may have retired and are not working to earn extra state pension. This also applies to non public service schemes that had a pension age of 60. It would be interesting to find out how many people who have a occupational pension age of 60 are still working and paying NI.
AS you can see thins are not simple as they seem.0 -
I have assumed that your pension scheme will go from 60ths to 70ths for future service
I don't understand how you can generalise on accrual rates like that.The worst scenario is that they could close down your scheme as final salary and change it to a defined contribution for future service.
Open final salary schemes in the private sector are already in the minority, and even those that went CARE (like public sector schemes have now gone) are increasingly closing.There seems to be lack of information about what is going to happen to non public service schemes when single-tier pension starts.
It's still up in the air frankly for at least one public sector scheme (LGPS) too - the outgoing government just hasn't thought through the details.Anyone in a public service is lucky as their pension schemes can't be changed for 25 years
Very unlikely (which isn't to say public sector DB will disappear any time soon).but they can earn extra pension from the state under single-tier if they are still working.
That isn't public sector specific. The difference is that private sector schemes are allowed (not forced) to weaken future accrual to make up for the loss of the contracted out ENICs rate.As far as I am aware all public service schemes have a occupational pension age of 60
Wrong - they vary, like they vary in private sector DB land. For pension currently being accrued they are likely to be a bit higher; also, shorter periods of final salary LGPS membership have never had an NPA less than 65.AS you can see thins are not simple as they seem.
Indeed! (I should also say - I agree with your overall message, I just think that emphasising a public/private sector dichotomy can more obscure than enlighten, especially once the LGPS is taken into consideration...)0 -
agarnett
Regarding your remark about your change in employment in 1989 and joining a DC arrangement.
Were you also contracted out in the DC scheme, if so contracting out for these schemes ceased in I think ceased on 6 April 2012.
I think these schemes started on 6 April 1987/8 used to have part of their increases partly protected by the scheme and anything in excess of 3% paid by the state.
I think that as they ceased being contracted out on 6 April 2012 they are not receiving any increases on their contracted out DC pension and may not be aware that it is not happening. Read page 51 and page 52 of NP46 dated April 2004 about increases on contracted out money purchase pensions.
As far as I can see non payment of GMP increases on money purchase schemes has never been mentioned in any threads or by the Government.0 -
Billopp wrote:Were you also contracted out in the DC scheme, if so contracting out for these schemes ceased in I think ceased on 6 April 2012.
I think these schemes started on 6 April 1987/8 used to have part of their increases partly protected by the scheme and anything in excess of 3% paid by the state.- A group personal pension policy (with Trustees running it) and
- a personal pension with the same provider set up in parallel to receive SERPS NI rebates from HMRC. It was backdated to 6.4.1987 and IIRC it also received some 2% incentive payment from HMRC to kick it off, although I forget what the 2% applied to.
I will certainly read the suggested material.
Thanks again to you and others for such informative contributions to this very important thread.0 -
Martin 51
Have a read of the articles I am listing below.
Saturday Independent 10 January 2014 by Neasa Macerlean.
"Losers who never knew in switch to single-tier pension".
FT Adviser by Tony Hazell 4 June 2014.
" DWP's Orwellian pension move is rather sinister"
Saturday Telegraph 7 March 2015 by Richard Dyson.
"Will you loose out under the state pension?
This is Money. 21 May 2014 by Tony Hazell.
" Revealed: Why millions won't get £155 new state pension they're expecting". This article includes information about non payment of GMP increases by DWP.
Barnett Waddingham article 18 August 2014 by Julian Mainwood. "What is a GMP?"
Read the third paragraph from the end under heading ending of defined benefit (DB) contracting out.
Tell me what you think after reading the articles.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 350.9K Banking & Borrowing
- 253.1K Reduce Debt & Boost Income
- 453.5K Spending & Discounts
- 243.9K Work, Benefits & Business
- 598.7K Mortgages, Homes & Bills
- 176.9K Life & Family
- 257.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards