What is it and what can I do with it ???

xylophone

You could leave it until age 65 and take the tiny pension increasing as described.

You could take it now on the terms proposed by Aviva (but it seems to me that triviality is not an option).

You could transfer out, take 25% tax free and leave the rest to draw as is most tax efficient?

And have you checked whether there are any other policies?

neilvw

No need to apologise. I am baffled.

No revaluation in deferment? That can't be right - ask why? There are legal minimum increases in both GMP and excess that should apply to you.

Excess over GMP
Social Security Act 1990 - Effective for leavers after 1 January 1991 - Revaluation extended to cover the whole of the member's pension, in excess of the GMP. Annual increase applicable was the increase in the Retail Price Index (RPI), capped at 5% (sometimes known as 5% Limited Price Indexation - LPI). [This is known as Schedule 3 Orders, formerly Section 52A Orders.]

Pensions Act 2011 - Effective after 5 April 2011 - Consumer Prices Index (CPI) replaced RPI as the basis for the minimum statutory revaluation. Rules for the pension scheme will determine whether this change was applied to benefits.

GMP
Any GMP element of a preserved pension must also be revalued, but the method is different to revaluing excess benefits. Currently, trustees have the choice of two different methods of revaluing GMPs: Full Rate increases or Fixed Rate increases. Schemes which opt for increases at Full Rate increase their GMPs annually in line with Section 148 Orders (previously known as Section 21 Orders). Section 148 Orders are based on the increase in the National Average Earnings Index each year.

Fixed Rate revaluation increases are determined by the date of termination of pensionable service. The annual percentage increase is fixed and depends on the date of leaving as follows:

Date of Leaving : Between 6 April 1988 and 5 April 1993
Annual Percentage Increase: 7.50%

Source: https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

Ask Aviva why there is no revaluation from date of leaving until normal retirement date, and also (as per xylophone's post) ask if you have any other policies.

The only thing I can think of is that your firm going bust meant that the scheme could dodge revaluation in deferment somehow. There was no Pension Protection Fund back then. But Aviva HAVE retained the promise to pay increases in payment from normal retirement date (at 3% and 5%).

Does anyone have any other thoughts?

neilvw

Ball-park estimates of pension after revaluation in deferment, if it does apply:

Minimum = £1,470.05 p.a. in 2015 terms (revaluation continues up to 2024)
Maximum = £2,618.33 p.a. in 2015 terms (revaluation continues up to 2024)

Note: minimum assumes GMP is revalued with S148 Orders (average earnings), maximum assumes GMP is revalued at the fixed rate of 7.5% p.a.

Sources: http://www.legislation.gov.uk/uksi/2015/187/pdfs/uksi_20150187_en.pdf, http://www.towerswatson.com/en-GB/Insights/Newsletters/Europe/uk-statistics/2015/UK-Statistics-July-2015

xylophone

It is possible that the starting amounts were very small and that the GMP quoted by Aviva has been revalued to age 65?

It would seem that the longest time he could have been in the DB scheme was two years and it may have been less than that as you said before.

The company was insolvent and it is possible that the scheme was in deficit - perhaps there was some sort of arrangement whereby NU agreed to cover the GMPs revalued at Fixed Rate and the excess on a proportionate basis?

The OP could check this with Aviva.

I think it is very unlikely that an insurance company would agree to revalue GMP at full rate - that way the liability would have been open ended?

neilvw

But Aviva have explicitly said that there is no revaluation between date of leaving and NRD - the OP needs to ask why.

I agree about Fixed Rate being by far the more likely, even though with hindsight it has been far more costly for insurers in recent times!

GMP of £342.68 in 1991 revalued with s148 Orders: £795.70 in 2015 terms
GMP of £342.68 in 1991 revalued at fixed rate of 7.5%: £1,943.98 in 2015 terms

thebullsback

This is way over my head people.
If it were you what letter would you write to Aviva about everything I have with them? and no doubt they will be looking in since I involved Aviva@social.

neilvw

Working backwards, if the stated GMP amount has already been revalued to 2024 at a fixed rate of 7.5%, the GMP at leaving would be just £33.87 a year.

£33.87 x (1.075)^32 = £342.68

Is that remotely possible for even one year of SERPS given up in 1991, on a decent salary?

neilvw

thebullsback wrote: »

This is way over my head people.
If it were you what letter would you write to Aviva about everything I have with them? and no doubt they will be looking in since I involved Aviva@social.

Sorry I know it's technical. We're just trying to understand their figures!

I think you should ask for
(a) a detailed explanation of why there is no revaluation of your pension between 1991 and 2024, as they stated in their response to you; and
(b) confirmation of any other pension policies Aviva hold for you, with a benefit/valuation statement for each. List any plan numbers you have.

thebullsback

I have emailed them those exact questions now. Thank you

xylophone

I agree about Fixed Rate being by far the more likely, even though with hindsight it has been far more costly for insurers in recent times!

This is true but of course it may have been costly for deferred pensioners particularly those who had only pre 88 GMP and whose GMP represented a high proportion of their Scheme Pension - the Scheme had no obligation to inflation link it after GMP age, and the COD was so much larger than pre 97 GMP that there was no increase through the state pension either.

And NU/Aviva seem to have had some unusual arrangements with these DB Replacement policies

https://forums.moneysavingexpert.com/discussion/comment/65006459#Comment_65006459
post 39.