HMG/Local Gov Pensions Apr 2016

bigfreddiel

I'm sure everyone who receives am HMG or Local Gov pension realises there will be no increase come April 2016.

Why is this? Well they use the inflation figure from Sep 2015, and this time it was less than zero. That means no increase!

State pension will be going up by 2.9%.

So there we have it.

I would like to be wrong on this, but I think I'm right.

Cheers fj

hyubh

bigfreddiel wrote: »

I'm sure everyone who receives am HMG or Local Gov pension realises there will be no increase come April 2016.

Why is this? Well they use the inflation figure from Sep 2015, and this time it was less than zero. That means no increase!

Active members will however face a negative revaluation in April (i.e., a decrease in the value of their CARE accrual for 2014/15), since what is effectively a 0% underpin for deferreds and pensioners doesn't apply.

State pension will be going up by 2.9%.

Or rather, the basic state pension will because of the 'triple lock', additions won't.

kidmugsy

hyubh wrote: »

Or rather, the basic state pension will because of the 'triple lock', additions won't.

Quite so. Though I'm rather puzzled that my wife's Basic Pension seems to be going up by only 2.8%. Maybe I'd better check my arithmetic.

greenglide

Though I'm rather puzzled that my wife's Basic Pension seems to be going up by only 2.8%. Maybe I'd better check my arithmetic.

Does she get the full basic pension or just a fraction?

The actual increase is initially a fairly precise percentage but is then applied to the 100% CAT A basic and that is rounded to the nearest (or rounded up) to 5 or 15 pence (I forget which).

So the percentage increase is always fairly random and then anyone not getting 100% sees rounding discrepancies as well though only to the nearest 1p. In this case the fraction that people get is recalculated from the new 100% rate, not the announced percentage.

woolly_wombat

hyubh wrote: »

Active members will however face a negative revaluation in April (i.e., a decrease in the value of their CARE accrual for 2014/15), since what is effectively a 0% underpin for deferreds and pensioners doesn't apply.

Also explained here:
https://forums.moneysavingexpert.com/discussion/comment/64671942#Comment_64671942

xylophone

Also explained here:

And covered here http://www.sypensions.org.uk/Home/News

"One of the most important features of the CARE scheme (LGPS 2014) is the way that pensions are revalued annually as it builds up. This is significant as there could be a period of 40 years or more between a members first year’s pension saving and retirement. Over this period of time the real value of the early years' pension will have been reduced by the effects of inflation. To stop this, the LGPS 2014 will revalue each year’s pension build up in line with HM Treasury Revaluation Orders (revaluation to be such percentage increase or decrease as is specified in an order made by HM Treasury). Therefore the LGPS provide for annual revaluation by reference to changes in prices up to September of the previous year based on the Consumer Price Index (CPI) rate of inflation.



The rate at September 2015 was -0.1%



So what is the effect of negative inflation?

Until now we were unsure on what the outcome of negative inflation would mean, as there is no statutory obligation on Government to apply a negative amount. However it has finally been announced that negative inflation will be applied, meaning Active Pension Accounts will be devalued by 0.1% from April 2016.

A reduction will also apply to members who had an active pension account between 01/04/2015 – 31/03/2016 and have now left/retired between the same period.

An article on the above will feature in Pension Planning and Retirement Insight due to be issued in April with further details."

woolly_wombat

I'll reproduce what TeaandScones said about the relevant legislation, to explain why she had decided to opt out of LGPS for one month only in 2014, before rejoining so as to keep her benefits separate:

https://forums.moneysavingexpert.com/discussion/comment/64671942#Comment_64671942

"The Pensions Increase Act 1971 is the old legislation by which public sector pensions are revalued each year. As the title suggests, this can only be increased and not reduced. This was shown in 2009 when inflation was negative when pensions were unchanged rather than reduced.

The new system is based on the Public Sector Pensions Act 2013 which applies to all new public sector pensions including those aggregated from previous service. The revaluation is then based on the Treasury Revaluation Orders which can be negative.
Thus if you have a pension already being paid or is deferred before 1st April 2014 for the LGPS and not aggregated you would be subject to the old rules.
In practice the difference is probably not likely to occur often but it may do again such as 2009."

With thanks to TeaandScones