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

MikeFloutier

Thanks SnowMan and Xylophone,

Reading your posts 63 & 66 regarding "special treatment", ie avoiding anti-franking it appears that Barclays may fallen this category.

It's unfortunate that I don't have my Scheme rules with me but I seem to recall that:

1. My entire pension is increased, from leaving by RPI/5% (with the proviso that if RPI is above 5% they will probably go for the higher figure), and

2. At GMP date my GMP portion is revalued at 7%, although presumably simply for the purpose of satisfying GMP rules - ie that my pension is at least the statutory minimum - NOT for the purpose of increasing my pension.

From a practical standpoint, the above method of increasing/revaluing my pension, seems to me to be completely fair as what it "said on the tin" was that I would get a pension of 2/3 final salary based on years of service, subject to regular increases of RPI/5%.

The trouble is that neither of my quotes, NRA or Early, bear any resemblance to this calculation - ie £7,290 x 1.7

xylophone

I have just consulted our pension scheme booklet - it says " Deferred pensions granted from1 Mar 1985 are increased in the deferred period by the same percentage as pensions in payment"- this is RPI in our case.

Deferred pensions can be brought into payment early at any time after Minimum Pension Age (with .......'s agreement) but subject to reduction to take account of the extra years of payment or at any age without reduction if ...... on advice from .......'s Medical Officer, considers that an ill-health pension would have been granted if the pensioner had still been employed by.........

Your pension is based on 1/720th of your pensionable earnings for each completed month of Pensionable Service generally up to a maximum of 480/720ths.... "

Does your scheme booklet say the same?

But our scheme uses Full Rate in respect of the GMP.

SnowMan

MikeFloutier wrote: »

Thanks SnowMan and Xylophone,

Reading your posts 63 & 66 regarding "special treatment", ie avoiding anti-franking it appears that Barclays may fallen this category.

I think this is highly unlikely to come under the public sector or quasi public sector separate treatment based on the information earlier (albeit I don't have access to your documents).

Amongst other indicators, if the scheme did increase the whole deferred pension in deferment at RPI (now CPI) then you would expect your NRA 60 pension to be in the region of 12,354 pa (= 7,280 x 1.697) from age 60 and not around £11,025 pa [= (5477 x 1.697) + (1,802 x 1.0)], noting that RPI (now CPI) and statutory revaluation are the same in your case as inflation has been cumulatively below 5%. I show the 1.0 to indicate where you are 'losing' the revaluation, it would be 1.697 if the whole deferred pension was increased with inflation to 60.

xylophone

Amongst other indicators, if the scheme did increase the whole deferred pension in deferment at RPI (now CPI) then you would expect your NRA 60 pension to be in the region of 12,354 pa (= 7,280 x 1.697) from age 60 and not around £11,025 pa [= (5477 x 1.697) + (1,802 x 1.0)], noting that RPI (now CPI) and statutory revaluation are the same in your case as inflation has been cumulatively below 5%. I show the 1.0 to indicate where you are 'losing' the revaluation, it would be 1.697 if the whole deferred pension was increased with inflation to 60.

I wonder whether Barclays use a particular month for revaluation, say RPI June, increase paid in August pension or RPI in May, increase paid in July pension etc and whether this would make any difference to your estimate above? (If by any chance they are using the separate treatment regime?)
http://www.swanlowpark.co.uk/cpirpimonthly.jsp

SnowMan

xylophone wrote: »

I wonder whether Barclays use a particular month for revaluation, say RPI June, increase paid in August pension or RPI in May, increase paid in July pension etc and whether this would make any difference to your estimate above? (If by any chance they are using the separate treatment regime?)
http://www.swanlowpark.co.uk/cpirpimonthly.jsp

They may be using a different month.

But ultimately the minimum statutory revaluation defined by statute effectively sets out which month to use for purpose of determining the revaluation increase (September as it happens in determining the following year revaluation).

A scheme is free to use its own formula with a different month (was there an indication of October earlier?) but it must check that this is more than the precise statutory calculation.

SnowMan

MikeFloutier wrote: »

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

The statutes covering anti-franking were effectively incorporated into the Pensions Scheme Act 1993 paras 87 to 90 (I think).

The worrying things is that in that DWP document I linked to earlier, it innocuously says

Male Pension before anti franking test (note the “relevant sum” is assumed to include revaluation on excess)

'Relevant sum' is the term used in the PSA1993 link above. But why the need for an assumption on whether the revaluation on the excess is included, it either does or doesn't include the excess revaluation by definition?

You wouldn't worry about that (after all it is the next line that talks about the after anti-franking test, so presumably there can't be any doubt that excess revaluation is included in that), unless you read the discussion and determination in the Biggs vs Harwich International Port Pension Trustee Ltd case decided by the Pensions Ombudsman see the reference at the end of this wikipedia article.

I've read that a couple of times, it includes an analysis from the Trustee side and from the Ombudsman side of what the Pension Scheme Act 1993 is saying in relation to franking (Warning: reading will cause your head to spin, it did mine :rotfl:)

While I am struggling to understand that, there is an inkling that there is a potential perceived loophole in the legislation to get the scheme out of paying excess revaluation from GMP payment age, where NRA is before GMP payment age.

MikeFloutier

Thanks Guys,

Will have to have a good look at the booklet when I get home next weekend.

I completely agree with your calculations SnowMan, it does look like this low, £11,000 quote, points towards some substantial increase at 65 (a la your Barber advice link).

Alternatively if, as Xylophone suggests, the RPI calculation date is a big issue, is it possible that SnowMan's £12,354 calculation (entire pension revalued at RPI/5%) could be toned down to £11,000 simply due to Barclays using a "low" date for RPI increases? Not sure if this is possible??

I think, from memory, that Barclays use August but that's another thing I need to check from the booklet next week.

Hopefully I'll have a reply from TW by then also.

Sorry if I've missed responding to any comments.

Also just noticed I haven't seen your last two posts SnowMan

xylophone

Biggs vs Harwich International Port Pension Trustee Ltd

I have just read through this - I am glad that the Ombudsman came down on the side of the pensioners!

Just one thing- in one of the communications from TW to Mike, (post 48) we read

However, please be aware that we do not “step-up” your GMP benefits. We will take the GMP benefits that you accrued up to your date of leaving and increase these benefits using the correct GMP revaluation rate up to the GMP payable date. Please note that GMP can be split between Pre 6 April 1988 and Post 5 April 1988. Once in payment, any GMP accrued prior to 6 April 1988 receives its increases from the State and not the Scheme, however this will be done automatically and no action would be required from you.! Should your GMP benefits exceed the value of your excess! pension, we will step-up your excess pension to ensure that this matches the minimum amount of pension that we must pay you.

and in the HIPPS document
11.10. The anti franking legislation restricts the extent to which the revalued GMP at SPA can be offset against the other elements of the member’s benefits. The minimum pension payable at SPA must be at least equal to:
- the GMP; plus
- revaluation on the GMP; plus
- the excess pension over the GMP excluding revaluation.
The effect is that the revaluation on the GMP may be offset against revaluation on the excess and increases to pensions in payment.


Do you think that this is relevant to Mike's case?

I'm becoming obsessed - I no longer count sheep at bedtime, I go over GMP calculations......:eek:

SnowMan

xylophone wrote: »

Do you think that this is relevant to Mike's case?

Yes absolutely. That was from Linklater's submission on behalf of the Trustees and the worrying bit. The Ombudsman didn't agree with Linklater's but that was on a different point.

I'm still struggling to understand it though.

I'm becoming obsessed - I no longer count sheep at bedtime, I go over GMP calculations......:eek:

Ha ha. It's like the Monty Python sketch of the wartime funniest joke ever where they could only translate 2 words of the German at a time or risk dying of laughter, although in this case if you try to look at this too deeply there is danger of dying due to the effect of pension complexity on the brain.

MikeFloutier

In the Biggs v HIPPS case, the Ombudsman says, in his Conclusion (section 23) "[the trustee] would be required to pay the member's deferred pension plus any revaluation on his GMP" he goes on to confirm that anti-franking still applies.

I assume that the reason that only the revaluation on the GMP is added to the pension is that the original GMP portion is already included in the pension.