State Pension Transfer Value Query

billsutils

In the late 70's I spent two years teaching in state schools before moving on into industy. Later in early 2002 I briefly returned to teaching for one term.


The 70's pension contributions were accrued during a time when 4 years accrual was needed to qualify for a pension. The one term was accrued in a period requiring two years accrual. Though I had over two years contributions I was not entitled to a reduced Teachers Pension due to the timing of my contributions. Teachers Pensions (TP) have confirmed this in writing.


My two options were to get my contributions paid back or to transfer the funds to another pension plan. I had contracted out of Serps in the 80's and had a suitable personal pension plan so I decided to transfer the funds. The final funds transfer took 8 months (!!)


At the start of the process TP sent me an estimated transfer value of about £11000. However the final value statement (and the eventual transferred value) was around £6500. No explanation was given regarding the near halving of the value, though the two statements were only about 3 months apart.


After the transfer I queried the discrepancy. Eventually I received a two line reply from TP stating that the discrepancy arose due to the State Minimum Pension. No other explanation or elaboration, just that.


I am none the wiser. Clearly the first estimate stated an estimated transfer value of £11000 not £6500. So where has the other £4500 gone?



Can anyone explain please? Thanks.
Regards
Bill

xylophone

After the transfer I queried the discrepancy. Eventually I received a two line reply from TP stating that the discrepancy arose due to the State Minimum Pension. No other explanation or elaboration, just that.

Can you quote the exact wording?

billsutils

Thanks for getting back Xylophone.

The exact wording is admittedly a little longer than two lines but still leaves me clueless. Full text of the final letter from TP is as follows:

"I refer to your recent letter regarding the recent transfer to [deleted].

May I explain that the CETV that was issued in December 2013 was an estimate which was calculated based on service and average salary and age factors provided by the government Actuary Department appropriate at the time of the calculation. It did not however take into account the guaranteed minimum pension (GMP) which has to be deducted from the transfer value.

I can confirm that the guaranteed transfer value that was issued to you in March 2014 is correct and includes a deduction in respect of GMP."
[unquote]

Admittedly it is a little longer than two lines. But I fail to understand why any of it gets dumped into a state scheme when it was mostly contributed 30+ years ago.

Would this happen if I (say) transferred one private pension fund into another?

Clearly my knowledge of what the GMP is is lacking. It would appear to be some form of "wrapper" around what was Serps/2SP? Or does this now mean I can, when I retire claim some extra pension?

Any clues would be gratefully received.
Thanks for your time.
Regards
Bill

xylophone

The TPS, like many other DB schemes, was contracted out of the State Earnings Related Pension Scheme - it therefore paid a lower rate of NI on your salary.

This is a link to the Civil Service Scheme Section 4 .7.5. entitled Former member left the PCSPS before becoming
entitled to a preserved PCSPS award (non-Club) - (I am assuming that the Administrators of the TPS have something similar.)

I wonder does it explain your situation? http://www.civilservice.gov.uk/wp-content/uploads/2011/09/5_from_4%2520pdf_tcm6-1545.pdf

If not, you need to write back to the Administrator and ask for a clear explanation with figures of exactly what has been done?

xylophone

And for more about GMP http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/

billsutils

Thanks Xylaphone.

Both the link and the document have been very useful. I do now have a semblance of knowledge about GMP!

Still, the drop of 40% in value for serps "feels" very high.

Even so, transferring the £6500 that would have effectively been lost was still highly worthwhile - even if it did take a month of sundays to do.

xylophone

Still, the drop of 40% in value for serps "feels" very high.

You can still ask the TPS administrator to explain the calculation and give the figures.

hyubh

billsutils wrote: »

Still, the drop of 40% in value for serps "feels" very high.

The fact all of the GMP involved was pre-1988 will be a big part in that - inflation proofing on pre-1988 GMP is the responsibility of the state rather than the pension scheme, so effectively your CETV is the value of the overall pension less that.

xylophone

OP when are you eligible for state pension?