STP means loss of GMP inflation proofing

greenglide

Cyberman60 wrote: »

I do think though that there is an impending uproar over this and governments cannot afford to upset pensioners. I have a feeling that all is not done and dusted just yet !!

The act has received royal assent so it is fairly well done and dusted.

This only applies to people who achieve SPA on or after 6/4/2014 who have been contracted out and have a GMP to inflation proof who are not in a public sector scheme. This loss won't be obvious

xylophone

BTW... what is COD ... a fish, cash on delivery ? ;0)

Contracted Out Deduction.

https://www.whatdotheyknow.com/request/148985/response/365599/attach/2/FoI%20601%2001.03.13.pdf

mike3y

Apologies if I have missed anyone else's post on this, but the following extract from Derbyshire County Council Pension Committee on 11 June appears to suggest that Councils will take over responsibility for payment of the full inflation increase for GMP post 2016:




"Further GMP changes from 2016


Government have announced that from 2016 Pension Funds will pay the full pensions increase (PI) on GMPs.


Currently when a pensioner reaches SPA the PI is split as follows;
• No PI on any GMP accrued prior to 6 April 1988 (known as the Pre 88 GMP)
• Up to a maximum of 3% PI on any GMP from 6 April 1988 (known as the Post 88 GMP)
• Full PI on the excess pension over GMP


PI on the Pre 88 GMP and any excess over 3% on the Post 88 GMP is paid by the State Pension Scheme.


From 2016, the payment of full PI moves to the Pension Fund. Whilst this is administratively simpler, it increases the cost of PI to the Pension Fund."


Good news?

greenglide

I assume this is a recognition of the government's statement a while ago that they "expected" public sector schemes to do this. I don't expect private sector schemes to follow.

Remember that under the act they are allowed to amend the scheme rules to recover the costs of the increased NI contributions without needing the trustees agreement.

In my case it will make little difference as all my GMP is with the LGPS scheme so it always seemed "safe" and I reach SPA a month after STP begins so the loss of NI savings is trivial.

xylophone

Apologies if I have missed anyone else's post on this, but the following extract from Derbyshire County Council Pension Committee on 11 June appears to suggest that Councils will take over responsibility for payment of the full inflation increase for GMP post 2016:

This confirms what was thought might be the case - see above.

Billopp

Sorry that I missed the post before. I wonder if Derbyshire County Council have jumped the gun. and are assuming they will have to pay increases on the full GMP.


The reason I say this, is that I have been in correspondence with The Treasury and DWP under freedom of information act and was told by both of them they could not give me any information regarding public service schemes taking over payment of increases on full GMP after 5 April 2016 as they are still discussing it. The last advice was 4 July from the Treasury saying they could not release the information.


Steve Webb has also stated to me in a letter dated 1 April 2014 that they estimate 80% of people in the private sector will have increases in their lifetime income from state pension that outweighs the additional National Insurance contributions and any adjustments to their workplace pension for years 2016/7 and 2020/21. He did not mention loss of GMP increases.


As people in the public service will not have any adjustment to future pension accrual under single-tier they will be much better of than someone in the private sector, especially as they will not suffer a reduction in their scheme for future service which most people in the private sector will, either because the go from 60ths to 70ths for service after 5 April 2016, increases in contributions or a mixture of both because the employer will no longer receive NI rebate of 3.4%.


As Steve Webb is stating most people in private sector will receive more under single-tier and gave that as a reason for not paying GMP increases after single-tier pension starts do you think that public service schemes will be allowed to pay GMP increases especially as they will not receive a reduction in future pension accrual.


As the report by Derbyshire County Council is dated 11 June 2014 which is about three weeks before my reply from the Treasury regarding not releasing information about if the Public Service Schemes are to pay full GMP increases or not it would be interesting to see if any of you have seen a copy of the announcement from the Government that from 2016 pension funds will pay full pension increases (PI) on GMPs.