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

mrschaucer

Don't know about anybody else, but I'm gamely paddling like hell trying to keep up. All congratulations to those ferreting out information and presenting it in posts which (despite the wet towel) are actually comprehensible to those of us not gifted in arcane pension-speak.

xylophone

(first and last time I will find a better link than xylophone )

Merci du compliment but you flatter me! And your knowledge of the GMP is far greater than mine!

I have been looking back through previous posts and found this thread https://forums.moneysavingexpert.com/discussion/1439747 see post 25, 26 and 33 - these seem to back up TW's position ( if my understanding of it is correct)?
Also https://forums.moneysavingexpert.com/discussion/4758875 post 5.

That said, I have also found this http://www.traverssmith.com/media/604607/whip_issue_30.pdf

"Schemes with rules requiring the whole of a deferred pension to be revalued fully in line
with (uncapped) RPI, including any GMP, currently qualify for special treatment under
the legislation. In effect, so long as the member's pension at age 60 (women) or 65
(men) is at least equal to the GMP (including normal GMP revaluation), the anti-franking
requirements can be ignored. Many public sector schemes, but not many private sector
schemes, are able to take advantage of this special treatment. The relevant statutory
provision (section 84(5) of the Pension Schemes Act 1993) is being amended so that
the reference to RPI is being changed to "rise in the general level of prices". This will
ensure that public sector schemes will qualify for the special treatment. Private sector
schemes which have hitherto qualified or now wish to do so should seek specific advice
on their position."

Now, the scheme with which I am most familiar does indeed increase pensions in deferment at the same rate as pensions in payment so the above (re ignoring anti franking) applies - the question then is, are other schemes which use the statutory revaluations for GMP/excess doing the same ?

I am going to have to give up on this - my fuse has blown.....:eek:

MikeFloutier

Thanks all, esp SnowMan,

We're currently on holiday in Cornwall, hence the slow reply. We have a 7 mile round trip walk from Restronguet to Mylor Yacht Harbour for breakfast each day. At 2 miles in, we are literally a stone's throw from the cafe but still have along and winding walk around the creek before get to our destination.

This is what it feels like trying to understand my pension, I think I see my destination but getting there is another issue altogether!!

It's funny but this morning I was Googling "anti-franking" and amongst other pages, I also got your one SnowMan. I was thinking of posting your very illustration, as it seemed to fit my circumstances so well but it was so lovely at The Pandora that you beat me to it:).

Anyway I totally agree and this so ties up with the Anti-franking definition on http://www.pensions-institute.org/references/pensions_terminology.pdf , which says:- "Anti-franking legislation requires that statutory indexation of an individual's Guaranteed Minimum Pension is paid in addition to any amount by which the scheme benefits exceed the GMP, and is not deemed to be covered or "Franked" By other scheme benefits". - It then cites the relevant statutes

SnowMan

xylophone wrote: »

I have been looking back through previous posts and found this thread https://forums.moneysavingexpert.com/discussion/1439747 see post 25, 26 and 33 - these seem to back up TW's position ( if my understanding of it is correct)?

From a quick read I can't see anything there to back up TW's position.

Post 25 is specifically answering a question about taking a deferred pension early before the scheme NRA. In that case the test at GMP age (65/60 for males/females) is whether the early retirement covers the revalued GMP and not whether the early retirement pension covers the revalued GMP at 65/60 plus revalued excess. If it were the latter tougher test then logically early retirement would be ruled out in most cases because it would be too costly for the scheme.

It makes logical sense that no additional test applies on early retirement other than that the revalued GMP is covered at 65/60 and I am sure that is the case. The scheme offering early retirement of a deferred pension is really the scheme doing the member a favour by giving them an extra option. If terms were set on a cost neutral basis to the NRA pension then all that is happening in any case is that the NRA option is being restructured. And provided the NRA option is protected by the tougher test at 65 (or 60 for females) then the member gets fair value. And if the early retirement terms are penal the member can just wait until NRA for their pension. Of course the state still wants certainty that the scheme provides at least the contracted-out replacement i.e. the GMP is covered at age 65/60.

The position at NRA is different and that is where the tougher test applies to someone taking their deferred pension at NRA before 65/60 when they subsequently reach 65/60, i.e that the pension is at least equal to the revalued GMP plus the statutorily revalued excess. Were this tougher test not the case the member would have no way to gain from their full excess pension at leaving and its deferment revaluation.

Remember the TW email was talking specifically about the age 60 NRA option when implying that only the revalued GMP had to be covered.

I suggested it earlier, but I am wondering if the explanation behind the higher early retirement options really is that no step is required at age 65. Because there is no need for a step at 65 (provided the revalued GMP is covered) the scheme can afford to provide a higher early retirement pension at say 59 years and 10 months because it can recoup the 5 years and 2 months higher payments against lower payments after age 65, relative to the age 60 NRA option where it is forced to top up to revalued GMP plus revalued excess.

I still think it is important to get clarity on the NRA 60 option before trying to look at early retiremnet possibilities.

SnowMan

xylophone wrote: »

"Schemes with rules requiring the whole of a deferred pension to be revalued fully in line
with (uncapped) RPI, including any GMP, currently qualify for special treatment under
the legislation.

That is referring to public sector schemes where no minimum benefits test applies at 65/60 as I understand it and to quasi public sector schemes such as the privatised industries such as British Telecom where a restricted minimum benefits test of revalued GMP plus unrevalued excess applies. That may be slightly wrong but that is the sort of idea.

Historically it was the private sector schemes who used to hammer people who left their employment which caused all the sequential statutory protection to deferred pension rights. The public sector schemes were always fairer and while I don't know the full history, the legislation wasn't aimed at them and so they no doubt were excluded from the full administrative brunt of the legislation hence the different test.

For these particular schemes they increase the whole pension in deferment at a single rate such as RPI, that is they don't split it into GMP and excess and revalue them at separate rates to get the total pension at NRA.

There is no indication that the Barclays scheme is of this type, being a private sector scheme you wouldn't expect it to be.

SnowMan

MikeFloutier wrote: »

We're currently on holiday in Cornwall, hence the slow reply. We have a 7 mile round trip walk from Restronguet to Mylor Yacht Harbour for breakfast each day. At 2 miles in, we are literally a stone's throw from the cafe but still have along and winding walk around the creek before get to our destination.

This is what it feels like trying to understand my pension, I think I see my destination but getting there is another issue altogether!!

Funny that, as being on holiday in Cornwall was what resulted in me joining the thread late on. We always go to the north coast and look down on people who go to the south coast :rotfl:

Love that analogy :T

Enjoy the rest of your holiday.

xylophone

There is no indication that the Barclays scheme is of this type, being a private sector scheme you wouldn't expect it to be.

No - the link cited in my post did say "Many public sector schemes, but not many private sector
schemes, are able to take advantage of this special treatment."

I simply thought it interesting that if I am understanding what TW have said correctly, they seem to be applying the same principle to the Barclays Scheme?

SnowMan

xylophone wrote: »

No - the link cited in my post did say "Many public sector schemes, but not many private sector
schemes, are able to take advantage of this special treatment."

I simply thought it interesting that if I am understanding what TW have said correctly, they seem to be applying the same principle to the Barclays Scheme?

Sorry, read your post too quickly.

It's one way to try and reduce their deficit perhaps?

xylophone

We're currently on holiday in Cornwall,

It's many years since I've been there, but "Doc Martin" makes one feel nostalgic!

Is it worth trying the link in my post 58?

I do hope that when you have finally resolved the matter, you will come back with the answers - I am finding this a fascinating and educational experience!

xylophone

It's one way to try and reduce their deficit perhaps?

Oh dear! The writing was on the wall back in 2009 when the DB Scheme ("a relic of the past" according to John Varley the Chief Executive) was closed?
http://www.dailymail.co.uk/news/article-1190624/Barclays-shut-final-salary-pension-scheme-18-000-employees.html