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The Real Truth of new 'flat rate' pension (where everybody gets different amounts)
Comments
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I'm afraid so. The problem is that the contracted out deduction doesn't just deduct from the contracted out years, it can also deduct from contracted in years. I didn't appreciate that sufficiently when I wrote the earlier replies.
The statement is correctly telling you what you've accrued, but not telling you how much will be deducted.
I think you're right about contracting out. I'm not sure how much of the additional state pension for the contracted in years you will lose to the contracted out deduction. Much of it but I don't know how much. Until the pensions people calculate your GMP for the foundation amount calculation I don't think it's really practical to try to estimate it. Greenglide's "not much" and my "much" could be right.
The basic state pension part won't be touched, though.
I think there’s a more fundamental difference between your interpretation and Greenglide’s interpretation.
I think what Geenglide is saying is that my pension forecast does take into account the GMP reduction but that it can only take it into account up to the date of the forecast. The final amount will be calculated with a GMP reduction to April 2016 but because that is only two years or less after my forecast was generated, the assumed growth in my nominal GMP would have a minimal effect on the original forecast.
I think what you are saying is that my pension forecast takes no account of the GMP reduction that has to be made and therefore when I get my final figure in April 2016, it could be significantly different from my pension forecast.
Obviously which one of you is right makes a big difference to me and so I would like to know who's correct.0 -
Yes, I said that PPF was wobbly in its first few years (it only got started about ten years ago), but thanks for reminding that some who lost their schemes earlier might never qualify for protection, and maybe that first year of hers was one such. She does actually write that she was contracted out for just seven total of her 40 qualifying years so far, so hers is still an interesting case, even if she hasn't fully bounded it properly yet.I'm just disagreeing with you and her. It'll happen from time to time.
She didn't write just one year contracted in, she wrote about the first year. She didn't say how long she was in it. Of course that firm may have gone bust well before the PPF so she might not get the full protection we're used to these days. Assuming she's a journalist, she might somehow be a Maxwell victim.
Aha, that's the more recogniseable jamesd!Though the word scam is really from Bootsox and absent a direct reply to that I'd have picked a less emotive word. I don't think that she's actually scamming anyone, just misleading and possibly even without realising it.
I don't think the article seriously misleads - technically her own example can of course be dismantled the way you have done, but I don't think her own example is the centre of the message the article wishes to get across. Generally the article I believe does far more good than harm if it causes many more people to question their own situation.
I'd argue strongly that there is certainly no good in telling people "Move on now, nothing to see here" if that's the general alternative view.
The two sentence paragraph that grabbed my attention was[SIZE=-2]We can also confirm that many retiring in the next decade will face punitive deductions, because penalties for contracting out are not limited to years contracted out alone. They can be applied across someone’s entire working history.[/SIZE]and then repeated in more detail[SIZE=-2]In preparation for our brave new world of “flat rate” pensions, beginning next April, everyone will receive a pension value, called a “foundation amount” (see below), which will be their starting point for the new system.
To calculate these numbers, DWP has resurrected the old GMP deduction formula. Furthermore, once you contracted out, even if for a couple of years, this deduction might apply across your entire Serps entitlement earned between 1978 and 1997, even though you were back in and paying full National Insurance (NI) for most of the period.
A DWP source confirmed: “It is a common misconception that any contracted-out deduction would be limited to the years for which a person was contracted out, and in effect any entitlement for years contracted in would be preserved.”[/SIZE]
Other articles I have read allude to the calculations DWP are trying to use being so complex that they are getting it wrong, and have many times in the past got it wrong, and indeed my own official NICO record seems to have a glaring error in it - what effect good or bad I have no idea about, but HMRC confirmed a few years ago as part of a summary of my NI contribution record that I had apparently paid a five figure sum in NI in just one tax year (I wish!)right in the middle of this 1978-1988 contracted out nonsense.
As I said earlier, I am not only concerned about the overlap effect of even a few contracted out years spoiling an entire career assessment for flat rate pension, but simultaneously becoming more concerned about how contracted out private sector DB schemes and the major firms of actuaries who advise them, actuaries who clearly may also have advised and lobbied the government "in consultation" perhaps for a few years now about pension reform, may have already rushed back long ago and started selling insider knowledge to schemes.
These "experts" seem to have received prior notice of intention on removal of GMP funding - maybe they even spawned it - so being cynical in my old age, I could easily imagine how they may have returned to corporate paymasters (sponsoring employers) months ago or even more than a year ago, and started downplaying scheme deficits and CETV obligations by abdicating GMP revaluation in retirement.
There are many risks to private sector DB pension schemes and sponsoring employers. We must not assume that anything in the recently announced reforms has caught them by surprise.
"GMP Savings" is a worrying term when it benefits the scheme and the employer. I would love for someone to tell me what it is and when it was introduced in contracted out private sector DB scheme jargon (I cannot find the term by Googling except in relation to public sector schemes). I found this for example in relation to Teachers Pension Scheme:[SIZE=-2]Guaranteed Minimum Pensions (GMPs)The exact same words and paragraph numbers can be found in the same typeface and layout in GAD (Government Actuary Department) documents describing the Firefighters Scheme and the Police Scheme, and very similar words also appear in the Principal Civil Service Pension Scheme.
4.1 The scheme is not liable for the full indexation of GMPs and so makes savings on GMPs compared to the cost of providing a fully indexed pension. Individual GMP data could not be supplied for members where the GMP was not in payment and so the savings have been estimated in an approximate manner.
4.2 The approximation is based on the ratio of GMP to other pension for pensioners who are old enough for GMP to be in payment. This provides an indication of the total GMP that will have been accrued in the Scheme. The approximation is intended to be unbiased but its accuracy will be affected by changes in scheme size and earnings profile over the period of GMP accrual (1978-1997).
4.3 The total estimated savings are just over 1½% of total liabilities and allowance for this serves to reduce the deficit contributions (assessed as being required for 15 years from 2015) by just over 1% of pay, compared with valuing all benefits as fully indexed pensions. Three quarters of the savings have been attributed to pensioner members with the rest split between actives and deferreds in line with the liabilities of those groups.
4.4 Much more complete data is expected to be available at the next valuation. Any difference between the estimated savings and a more accurate assessment using more complete data will feed into the surplus or deficit at that valuation and impact upon the employer contribution rate then determined in relation to addressing the surplus or deficit.
4.5 The estimation of GMP savings has no impact on the calculation of the cost cap.
Provided accurate GMP data is available as at 31 March 2015, the approximation will not apply to the starting value of the cost cap fund and so will not impact on the operation of the cost cap mechanism.[/SIZE]
But nowhere in any accessible private sector DB scheme document. At what point did the phrase "GMP Savings" cross from the public sector where it was (and remains benign) to the private sector where, like some jumped-across-species virus it seems to be threatening to become endemic, making an unexpected misery for unsuspecting members?
Is there indeed some relevance now of "GMP Savings" in reducing actual liabilities of private sector schemes as of 2015 (because of state pension reforms) that had not existed previously? The media up until now seem to have been looking at it (the withdrawal of GMP post retirement revaluation funding) through the other end of the telescope i.e. that the government bailing out of the burden would increase private sector scheme liabilities. Maybe a nod and a wink has already been given some time ago to these schemes that they too can start claiming "nuthin' at all to do with us, guv!"
"GMP equalisation" is another term barely understood by most, but which is supposedly another risk which schemes are already prepared for and which may affect scheme deficits and knock-on effect transfer values for example - how do these things really affect us as members? Will we ever know until they are a fait accomplit in our own case?
No, I say again, well done to Teresa Hunter and Telegraph Money for raising awareness of a difficult concept which it is important none of us ignore or blindly trust to others.
I think coyrls sums up the good done by the enhanced awareness very nicely in his last post above, and hundreds of thousands should be asking similar pointed questions about their own situation and not get fobbed off: "Obviously which one of you is right makes a big difference to me and so I would like to know who's correct."0 -
I don't think her own example is the centre of the message the article wishes to get across.
Blurb beneath the headline: 'For hundreds of thousands of people like Teresa Hunter, retiring in the decade after 2016 will not lead to a full state pension'simultaneously becoming more concerned about how contracted out private sector DB schemes and the major firms of actuaries who advise them, actuaries who clearly may also have advised and lobbied the government "in consultation" perhaps for a few years now about pension reform, may have already rushed back long ago and started selling insider knowledge to schemes.
Is anything you dislike not a conspiracy of actuaries and/or financial advisors?There are many risks to private sector DB pension schemes and sponsoring employers. We must not assume that anything in the recently announced reforms has caught them by surprise.
Get out the tin foil hat!"GMP Savings" is a worrying term when it benefits the scheme and the employer. I would love for someone to tell me what it is and when it was introduced in contracted out private sector DB scheme jargon (I cannot find the term by Googling except in relation to public sector schemes).
'GMP savings' isn't a technical term in public sector-land either.I found this for example in relation to Teachers Pension Scheme
The text you've quoted uses an analysis that is in fact rather generic.The exact same words and paragraph numbers can be found in the same typeface and layout in GAD (Government Actuary Department) documents describing the Firefighters Scheme and the Police Scheme, and very similar words also appear in the Principal Civil Service Pension Scheme.
Hmm, it's as if GAD are twiddling the numbers for each scheme they're working on in essentially the same manner. Perhaps they are even using the same template - the scoundrels!!!But nowhere in any accessible private sector DB scheme document.
The 'savings' referred to will commonly be more relevant to a private sector scheme - at the end of the day the analysis provided is largely academic for an unfunded scheme like the TPS given teachers' pensions and state pensions alike are paid out of general taxation.At what point did the phrase "GMP Savings" cross from the public sector
It was never a 'phrase' in the public sector in the first place.Is there indeed some relevance now of "GMP Savings" in reducing actual liabilities of private sector schemes as of 2015 (because of state pension reforms) that had not existed previously?
No - a contracted out scheme not being liable for the full indexation of GMPs in payment is just how GMPs work."GMP equalisation" is another term barely understood by most,
Probably because it's not a done-and-dusted thing, and the implications/best way to do it are still being assessed.0 -
Sorry but I don't often read your posts as they tend to be long winded and tedious, have you considered a bulleted style?The scam is perpetrated by the author of the piece and it appears to have suckered you in. Just in case I wasn't sufficiently clear with my earlier debunking: the author misled us about her entitlements. She will really get more than the full flat rate. She did this by pretending that the PPF doesn't exist, ignoring the value of her defined contributions pension and apparently using an age 55 annuity purchase rate to work out what she needed to catch up on the shortfall, most of which won't actually be a shortfall anyway.0 -
Blurb beneath the headline: 'For hundreds of thousands of people like Teresa Hunter, retiring in the decade after 2016 will not lead to a full state pension'
Is anything you dislike not a conspiracy of actuaries and/or financial advisors?
Get out the tin foil hat!
'GMP savings' isn't a technical term in public sector-land either.
The text you've quoted uses an analysis that is in fact rather generic.
Hmm, it's as if GAD are twiddling the numbers for each scheme they're working on in essentially the same manner. Perhaps they are even using the same template - the scoundrels!!!
The 'savings' referred to will commonly be more relevant to a private sector scheme - at the end of the day the analysis provided is largely academic for an unfunded scheme like the TPS given teachers' pensions and state pensions alike are paid out of general taxation.
It was never a 'phrase' in the public sector in the first place.
No - a contracted out scheme not being liable for the full indexation of GMPs in payment is just how GMPs work.
Probably because it's not a done-and-dusted thing, and the implications/best way to do it are still being assessed.
Have you considered ignoring the above poster for the sake of your own personal LE? Has done wonders for mine lol0 -
Ah ... have they gone?
Let's just see what our friend hyubh, the Local Authority Pension Scheme "expert" had to say about our private sector DB scheme GMPs:
Yes, exactly, so why haven't we seen any private sector scheme trying to make capital out of GMP Savings until recently? Because perhaps it was a zero sum game for them until the government recently said they were pulling out of GMP revaluation funding beyond retirement date?The 'savings' referred to will commonly be more relevant to a private sector scheme - at the end of the day the analysis provided is largely academic for an unfunded scheme like the TPS given teachers' pensions and state pensions alike are paid out of general taxation.
Well clearly it was. It was a GAD phrase used to describe an element within the funding of all public sector schemes.
It was never a 'phrase' in the public sector in the first place.At what point did the phrase "GMP Savings" cross from the public sector
That's how they were supposed to work until recently the government pulled the plug on private sector contracted out schemes - I'm offering that's possibly what makes "GMP Savings" relevant to private sector contracted out schemes now.
No - a contracted out scheme not being liable for the full indexation of GMPs in payment is just how GMPs work.Is there indeed some relevance now of "GMP Savings" in reducing actual liabilities of private sector schemes as of 2015 (because of state pension reforms) that had not existed previously?
Ah, a flat-earthist view. Until someone convinces that something is relevant, the holder of the view (guardian of the status quo
Probably because it's not a done-and-dusted thing, and the implications/best way to do it are still being assessed."GMP equalisation" is another term barely understood by most,
) will argue until blue in the face, even after they drop off some edge and call that the end they were expecting all along, that nothing is new.
Meantime, I have a private sector contracted out DB scheme where GMP Savings have reduced the latest transfer value by around a quarter, and where the actuary's computer system has a line in the calculation already prepared for GMP equalisation effects, although currently it doesn't affect mine. The factors are already pre-calculated however for when it does affect me. But hyubh doesn't seem much interested in what occurs in private sector schemes unless it's ex LGPS related, and perhaps doesn't want any other private sector heretic to raise new points of query either.
Hey ho. None so blind as those who will not see I suppose
I'd best go fetch some brushwood and a few firelighters for my stake in case they come back :rotfl:
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I think there’s a more fundamental difference between your interpretation and Greenglide’s interpretation.
I think what Geenglide is saying is that my pension forecast does take into account the GMP reduction but that it can only take it into account up to the date of the forecast. The final amount will be calculated with a GMP reduction to April 2016 but because that is only two years or less after my forecast was generated, the assumed growth in my nominal GMP would have a minimal effect on the original forecast.
I think what you are saying is that my pension forecast takes no account of the GMP reduction that has to be made and therefore when I get my final figure in April 2016, it could be significantly different from my pension forecast.
Obviously which one of you is right makes a big difference to me and so I would like to know who's correct.
OK, I guess I'm going to have to wait until April 2016 to find out, as I haven't had any reply, my own research hasn't helped and I have no way of calculating my own estimate. I, perhaps naively, think that Greenglide is more likely to be correct, as I can’t see how the DWP could justify providing a totally inaccurate forecast for my additional pension and then springing a significantly lower figure on me in April 2016.
I’ll come back in April 2016 and let you know!0 -
OK, I guess I'm going to have to wait until April 2016 to find out, as I haven't had any reply, my own research hasn't helped and I have no way of calculating my own estimate. I, perhaps naively, think that Greenglide is more likely to be correct, as I can’t see how the DWP could justify providing a totally inaccurate forecast for my additional pension and then springing a significantly lower figure on me in April 2016.
I’ll come back in April 2016 and let you know!
Well Coyrls, the lack of response perhaps confirms just how much uncertainty exists around your case, and no doubt many others.
Are you saying that you'll wait until April 2016 as once it's confirmed at that time it will be set in stone, whereas any forecast you might request before then might not be worth the paper its written on?0
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