Barclays Final Salary pension GMP/Excess revaluation & Anti-franking

MikeFloutier

Hi,

I'm six months away from my NRD (3 Feb 2014), having left my employer (final salary scheme, opted out of Serps - Barclays) on 31 Dec 1994 after 21 years and some months.

I had been tracking my likely pension via their web-site illustration system - whilst figuring out what to do at NRD.

Now I get their written illustration and the headline figure (i.e.. pension with no TFLS) is £11,025 (let's call this "A"). This is very different to the £14,209 (let's call this "B") I was led to expect by their illustration system.

I've spoken to them and the difference is as follows:

A is taken from an illustration titled "Normal retirement statement on 3 Feb 2014, whereas,

B is taken from an illustration titled "Early retirement statement on 31 Jan 2014, i.e. 3 days earlier.

Their explanation of the big difference is that with A, the GMP portion is not paid until my State Pension Date, whereas with B the GMP (or a representation of it) is paid from what would technically be my Early retirement date (i.e. 3 days before my NRD.)

This seems a good and valid explanation of what, at first sight, doesn't make a lot of sense.

OK, so my next question to them is, "how much will my GMP portion be (approximately??) at my SPD if I opt for taking my pension at my NRD, i.e. option A above."

Obviously I need to know this to make a sensible comparison of these two options - ignoring the other issues fttb.

Their answer is that, "we can't tell you that as the government let us know the figure at your State Pension Date"

At this stage I realise I need to do some digging re GMP, about which I know next to nothing, and so I tell them this.

Looking at the documents I've received from Barclays as recently as June 2011, I can see reference to the fact that the "GMP portion of your deferred pension is £1,802.84" They also say that, "The GMP portion of your pension has not been increased but will be increased at age 65".

They enclose a guide showing how the GMP portion will be increased which says, "Any GMP element has increased each April; the rate being determined by the date you left the scheme."

I left the scheme on 31 Dec 1994 which equates to a rate of 7%.

My question is, can I calculate what my GMP portion will be at age 65 (+ some months, as I believe it now is)?

Many thanks for your help with this.

Kind regards,

Mike

xylophone

http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/[url]
http://www.barnett-waddingham.co.uk/news/2012/07/revaluation-for-early-leavers/[/url]
"The revaluation period for GMPs is the number of complete tax years between a member's date of leaving and their GMP Pension Age. For members retiring before they reach GMP Pension Age, the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates."

I believe that the Barclays Scheme used Fixed Rate - if so, it would be 7% in your case?

You reach SPA in 2019? See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf


https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181229/single-tier-pension.pdf

MikeFloutier

Many thanks Xylophone,

Looking at the Barnett Waddingham, "early leavers" page, there is a paragraph that I found ambiguous. It says:

"The revaluation period for GMPs is the number of complete tax years between a member's date of leaving and their GMP Pension Age. For members retiring before they reach GMP Pension Age, the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates. "

My circumstance is that I'm "retiring" 5 years before my GMP pension age. In this situation Barnett Waddingham say that: "the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates."

I'm unclear as to which two dates they are referring to. Presumably it's: 1. date of leaving, and 2. "retirement". Is this the case?

I guess my only other question would be: "Is the revaluation a cumulative affair OR is it simply a matter of adding 7% (in my case) each year?

Many thanks!

xylophone

"The revaluation period for GMPs is the number of complete tax years between a member's date of leaving and their GMP Pension Age.

The early leavers.

For members retiring before they reach GMP Pension Age, the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates. "

For example men who stayed with the company until scheme pension age at 60 and retired but did not reach GMP age (65) for another five years.

The 7% is compound - you might find a PM to Snow Man helpful - he is a whizz on GMP. https://forums.moneysavingexpert.com/discussion/4549283 see post 10.

MikeFloutier

Thanks Xylophone, it makes sense now.

I was thinking the text I quote differentiated between normal leavers and early leavers whereas it was actually just reiterating the principal of GMP revaluation and then applying it to an early leaver.

So, to summarise my position, what I think you are inferring is that my GMP (£1802 at leaving on 31/12/94) will be revalued each April 6 at a rate of 7% (as per scheme rules), compounding until the April before my 65th birthday (approx) - i.e. 6 April 2018.

This would be 24 years which by my reckoning would give me a GMP of £8591.

If this is correct, then it would seem sensible for me to hold out for this in 5 years time rather than taking it now at a much lower rate - they are offering me an extra £3,200pa on top of my Excess portion of £11,000 as an alternative.

The cross-over point appears to be around age 68.

I guess my next question is: "Does my GMP portion continue to benefit from revaluations once it is in payment at 65?"

Thanks again!

xylophone

http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/

See GMP in Payment - but see also https://forums.moneysavingexpert.com/discussion/4532605 post 12 and 13 - Post 13 refers to

http://webcache.googleusercontent.com/search?q=cache:rZgVz5VexKsJ:www.pensions-ombudsman.org.uk/determinations/docs/2008/aug/s00105.doc+&hl=en&gl=ukYou might be interested in this as it concerns Barclays.

https://forums.moneysavingexpert.com/discussion/4532605 post 21 and what follows

The above cover the current position. But you will reach GMP/SPA age under the new single tier pension.

See links in my previous post concerning the single tier pension and also https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/209092/foi-1816-2013.pdf

And do try Snow Man who is very knowledgeable. https://forums.moneysavingexpert.com/discussion/4509161 post 6

MikeFloutier

Thanks Xylophone, I have written to SnowMan as you suggest.

I'm gradually starting to make sense of this morass of information, almost all of which is new to me.

I guess the most important thing in all this is to be able to see which part of it is most important and focus on this fttb.

My feeling is that the important decision (ignoring the TFLS aspect) is whether to select option A or B as offered by my Scheme. (see post 1).

Therefore my simple question - and I'm really looking for a Yes or No here (please, no more links fttb:) - no offence, they are very informative and targeted) - is:-

If I opt for A, (ie Normal retirement and a lower initial (excess) pension) will they definitely pay my full GMP (i.e. £1802 compounded at 7% pa over 24 years making £8591) at age 65 (approx).

xylophone

I am finding it difficult to get to grips with this because at Scheme Retirement Date, when you bring your pension into payment, the pension should include the GMP and thereafter the whole of your pension should increase according to your scheme rules until you are 65- when you are 65 you will be given the final figures for your pre and post GMP which are the amounts used to calculate your scheme pension increases thereafter.

For example, let us suppose that at 65 your pension is say £20,000 per annum of which £3000 is pre 88 GMP and £1000 is post 88 GMP - then Barclays will pay no increase on £3000, up to 3% depending on inflation on £1000 and whatever the scheme rules indicate on £16000?

Incidentally, it might be worth establishing whether the Barclays Scheme practises abatement at SPA ( a reduction in Scheme Pension to take account of the fact that you are receiving State Pension).

I am hoping that Snow Man can clarify your situation.

MikeFloutier

Thanks Xylophone,

I think I understand the Increases bit now. Regarding the State pension reduction figure, they have already advised my of this.

They are quite clear in stating that the GMP will not be paid until 65; this seems reasonable as it's intended to replace the SERPS Additional Pension which would naturally not be payable until 65 - that's my understanding anyway.

My real question remains (assuming my GMP is payable at 65): Is there any reason why I shouldn't expect to get £8591 pa GMP, as calculated in post 7?

mania112

Firstly, are we talking about either retiring at age 65 or 3 days earlier (the A versus B shown in the first post)?

In any case: When you turn 65, a GMP will be paid.

That's the only fact you need to be concerned with, really.

If your reduced pension for retiring early was £5,000, the £5k is calculated to ensure once you hit 65 it has grown to be at least the GMP.

GMP is the guaranteed minimum pension (as you know), so it's the minimum the pension must be at 65. At that's all.

EDIT: And so if GMP can not be met by retiring early, they wouldn't let you do it (unless you were at 'deaths-door')

If normal retirement is way in excess of the GMP, it's clearly irrelevant that there's a guaranteed minimum.

If you retire early the pension at 65 still needs to be at least equal to the GMP proportion.

What GMP isn't, is an additional amount. It's normally a total pension (of which GMP is £x).

xylophone

Even if a deferred pensioner brings his deferred pension into payment before his Scheme Retirement Date ( and in that case usually (but not always, depending on any special arrangement the Scheme might make) suffering an actuarial reduction), the pension he is paid includes the GMP- in a sense, it is only at GMP age (which always used to be and in your case still is State Pension Age) that the GMP becomes an important consideration because of the way that pension increases are paid after that point.

The GMP is not an addition to your Scheme Pension but part of it unless Barclays have some other type of arrangement which does not appear to be the case judging by the Ainsworth case to which I refer in post 6, and which also mentions the abatement (nothing to do with GMP) which Barclays still seem to impose.