Guaranteed minimum pension rules

enthusiasticsaver

Does anyone have any information or experience about guaranteed minimum pensions (GMP)? I have one from Barclays who I worked for 8 years for between 1978 and 1986 and left with a deferred GMP as the scheme was contracted out of SERPS.

The Barclays pensions administrator refuses to revalue as it says it is down to HMRC when I reach 60 in 7 years time and only quotes the amount at leaving and not with the statutory annual increases which make a significant difference considering it will be 34 years worth at 8.5% per year! They have said it will be revalued on retirement which does not help at all with forward planning.:(

Given the constant changes to pensions by the government does anyone have any experience of claiming this at retirement?

parcival

My wife has a similar situation with several different GMP's from different employers. Her Barclays pension was transferred to a section 32 pension with the Prudential. We have simply taken the GMP upon leaving Barclays (think it was quoted as an amount per week) and compounded at 7% (in her case) to give a final figure at aged 60. This agrees with the figure that the Pru are expecting to pay.

One of the other pensions quoted a pension at aged 60 which we queried. The company said it would need to check the figure with HMRC and it came out as a difference of about 70 pence a week.

mania112

If we assume your GMP is revalued by the 'fixed rate' method (there are 2 other less common methods), here's how it revalues:

For leavers

before 6 April 1988: 8.5%
6 April 1988 - 5 April 1993: 7.5%
6 April 1993 - 5 April 1997: 7.0%
6 April 1997 - 5 April 2002: 6.25%
6 April 2002 - 5 April 2007: 4.5% and
6 April 2007 - 5 April 2012: 4.0%
6 April 2012 + : 4.75%

Any excess benefits beyond GMP have revalued at CPI max 5% from 6/4/1997 to 5/5/2009 and CPI max 2.5% since.

enthusiasticsaver

I have also compounded the annual rate and it agreed in 2001 which was the last time it was revalued by the Barclays pension team.

I have asked several times to transfer to my current LGPS scheme but they said it was not transferable. The present Barclays pensions admin company say they will not check the new valuation with HMRC until retirement although the Barclays pension team did it with no problem in 2001. As far as I know though the age is still 60 for women even though the state pension age for me is now 66.

What concerns me is that the pension administrator say the pension paid at retirement will depend on HMRC rules and we all know how they keep moving the goalposts.

SnowMan

enthusiasticsaver wrote: »

Does anyone have any information or experience about guaranteed minimum pensions (GMP)? I have one from Barclays who I worked for 8 years for between 1978 and 1986 and left with a deferred GMP as the scheme was contracted out of SERPS.

The Barclays pensions administrator refuses to revalue as it says it is down to HMRC when I reach 60 in 7 years time and only quotes the amount at leaving and not with the statutory annual increases which make a significant difference considering it will be 34 years worth at 8.5% per year! They have said it will be revalued on retirement which does not help at all with forward planning.:(

Given the constant changes to pensions by the government does anyone have any experience of claiming this at retirement?

Without knowing the Barclays scheme it is hard to be precise. I am assuming the Barclays scheme retirement age is 60.

But if you left service between 1st January 1985 and 6th April 1988 and Barclays used fixed rate revaluation of GMPs (there is a different method of limited rate but if your statement shows 8.5% then they will be using fixed rate) then the GMP element of your deferred pension will be increased at 8.5% per annum.

Your deferred pension at leaving will show the initial GMP at leaving. Pre 88 GMP is revalued under fixed rate at 8.5% for each complete tax year between leaving and age 60.

If there are 34 complete tax years between date of leaving and age 60 then the revaluation of the GMP will be 1.085^34 - 1 or 15.018 times the GMP.

So for example if your deferred pension at leaving in 1986 was £300 of which £100 was pre 88 GMP, and there are 34 complete tax years from leaving to age 60 then your pension at 60 will be

Deferred pension at leaving £300
plus GMP revaluation to 60 = £100 x 15.018 = £1502
Total pension at 60 = £1,802

Note because you left after 1st January 1986 Barclays will also have to increase your excess pension above GMP at leaving that accrued after 1st January 1985 by 5% or RPI (now CPI) for each year between leaving and the scheme retirement age. Because most of your service is pre 1/1/85 then the revalued element is small.

However some schemes were more generous than this and increased the whole excess rather than what state required them to do which was just the post 1/1/85 excess.

Have you got a recent state pension statement? Worth doing this for planning purposes. Note the additional STATE pension pre 97 is calculated as the SERPS pension that you would have accrued had you you contracted-in to the state scheme throughout (even though you contracted-out for some of the time) less the revalued GMP at 8.5%. Because of the high revlauation rate of 8.5% that can eat into any state additional pension you may have earned for a separate period of contracting in. However it can't be negative. The DWP should also be able to confirm to you your GMP amount on leaving Barclays (you will need to speak to them probably) although they will refer to it by a different name the COD (or Contracted Out Deduction).


Note as Barclays was contracted-out of SERPS it is Barclay's responsibility to PAY the GMP. They are contractually committed to pay the GMP so i wouldn't worry about this changing. However the GMP is calculated by the State using a precise formula. So Barclays will obtain the revalued GMP amount off the DWP at 60 (to check their own figures).

I would try Barclays again to see if they can help explain how your pension at retirement is calculated.

If this fails get together your paperwork (deferred benefit statement, scheme booklet if you have one) and contact The Pensions Advisory Service for help.

enthusiasticsaver

Thanks Snowman I will try the Pensions Advisory Service. The Barclays pension administrators are worse than useless! I have an up to date state pension valuation.

The issue is the age as I would like to retire at 60 in the same year as my husband (in 6 and a half years time) with my LGPS, the Barclays one which still states he GMP retirement date is 60 for women and additional savings like ISAs etc as my state pension does not start paying until I am 66 so I have a 6 year gap to plug! The GMP would be useful for this as I work it out it should be approx £3.5k per annum so not to be sniffed at.

SeekTruth

enthusiasticsaver wrote: »

Thanks Snowman I will try the Pensions Advisory Service. The Barclays pension administrators are worse than useless! I have an up to date state pension valuation.

The issue is the age as I would like to retire at 60 in the same year as my husband (in 6 and a half years time) with my LGPS, the Barclays one which still states he GMP retirement date is 60 for women and additional savings like ISAs etc as my state pension does not start paying until I am 66 so I have a 6 year gap to plug! The GMP would be useful for this as I work it out it should be approx £3.5k per annum so not to be sniffed at.

There is another point to bear in mind. Your GMP is all pre-April 1988 and so the pension scheme (Barclays) is not liable to pay any increases once it is in payment. At the time it was expected that the state would pay inflation increases on the GMP along with your state pension. However, as you reach State Pension Age after the proposed introduction of the Single Tier Pension it now appears that the state will not be paying any such increases.

enthusiasticsaver

SeekTruth wrote: »

There is another point to bear in mind. Your GMP is all pre-April 1988 and so the pension scheme (Barclays) is not liable to pay any increases once it is in payment. At the time it was expected that the state would pay inflation increases on the GMP along with your state pension. However, as you reach State Pension Age after the proposed introduction of the Single Tier Pension it now appears that the state will not be paying any such increases.

Yes, I have been reading up about the single tier pension and how this might affect the increases after the pension age. I have also spoken to the Pensions advisory service as suggested by another poster and they have clarified that the fixed rate of 8.5% Barclays has said they will pay until the GMP retirement date of 60 (for a woman) is not guaranteed to rise after payment particularly after the single tier pension comes in after 2016. At the moment it is being increased by 5% per annum but in a few years time this may not happen even though I don't qualify for the state pension until 2026 but the GMP kicks in at 2020.

I was more interested in the fact that it should have been uprated annually since deferment and have now had confirmation of this. Of course things could change again!!

parcival

I can confirm that the GMP age for women is 60 regardless of state pension age. I don't think this is likely to change in the near future.

xylophone

I can confirm that the GMP age for women is 60 regardless of state pension age. I don't think this is likely to change in the near future

http://www.maturetimes.co.uk/campaigns/pensions-benefits/3439-steve-webb-confirms-women-to-lose-gmp-increase-on-pension.html might be of interest.