Government to inflation proof GMP of public sector ...

greenglide

The news about the treasury inflation proofing the GMP of "public sector" workers who reach SPa between 6/4/2016 and 5/12/2018 has been around for some time now - https://www.gov.uk/government/news/government-one-step-closer-to-introducing-new-state-pension-this-year. This is until the equalisation of SPa for male and female is complete in December 2018. The reasoning behind this seems a little "strange" but it is all tied into female / male equality somehow.

The term "public sector workers" is used in the treasury announcement to identify the people benefiting from this but is the meaning of this actually defined?

I am a member of the LGPS and fell on the wrong side of 6/4/2016 with an SPa date in May 2016. All of my GMP is in the LGPS having worked there from 1990 to 1996 and transferred a private sector pension in there as well giving me both pre and post 88 GMP. I had pretty much written off the indexation of this GMP:-(

However does "public sector" include Local Government?

The LGPS web site certainly counts itself as a "public sector scheme" - see here http://www.lgps.org.uk/lge/core/page.do?pageId=97977 as it claims to be "the Local Government Pension Scheme is one of the largest public sector pension schemes in the UK."

Since the announcement gives indexation "for life" for this group I have a major interest in this. Google has turned up this "LGPS to meet cost of GMP inflation proofing" at http://www.pensions-expert.com/DB-Derisking/LGPS-to-meet-cost-of-GMP-inflation-proofing?ct=true

Has anyone else heard anything?

GunJack

I've been keeping half an eye on this, as I have 20 years of deferred Classic PCSPS waiting for me at 60 (which I only found out recently thanks to this forum contains an element of GMP). What I haven't seen in relation to this is:- does this mean there's going to be a shift away from index-linking generally before I hit 60 in 2027, and therefore my CS pension be worth less by I get it?

edit - "public sector" is used without much consistency to it's meaning, often actual Civil Servants aren't counted as public sector for some strange reason....

hyubh

greenglide wrote: »

The term "public sector workers" is used in the treasury announcement to identify the people benefiting from this but is the meaning of this actually defined?

The phrase 'public service pension scheme' is the key one. Been around in law for a few years now, e.g.:
http://www.legislation.gov.uk/ukpga/2013/25/section/28

However does "public sector" include Local Government?

Yes, and by 'government' the Treasury actually means the funds themselves in the case of the LGPS.

Since the announcement gives indexation "for life" for this group I have a major interest in this.

Lucky you...

xylophone

http://www.pensions-expert.com/DB-Derisking/LGPS-to-meet-cost-of-GMP-inflation-proofing

Presumably the April 2016 letters/newsletters to pensioners and deferred pensioners will confirm.

greenglide

Presumably the April 2016 letters/newsletters to pensioners and deferred pensioners will confirm.

I am waiting for my individual notice with the split between GMP (pre and post 88) and the excess with baited breath as SPa is only two months away. Current payslip simply splits into pension and pension increase.

greenglide

What I haven't seen in relation to this is:- does this mean there's going to be a shift away from index-linking generally before I hit 60 in 2027, and therefore my CS pension be worth less by I get it?

The present announcement only applies to people with an SPa date of 6/4/2016 to 5/12/2018 and indexes their GMP "forever".

Everyone else will have to wait the outcome of the consultation.

This does not impact the indexation of the PCSPS itself, only the GMP which, up till now, was paid with the State Pension as all DB schemes did.

GunJack

greenglide wrote: »

The present announcement only applies to people with an SPa date of 6/4/2016 to 5/12/2018 and indexes their GMP "forever".

Everyone else will have to wait the outcome of the consultation.

This does not impact the indexation of the PCSPS itself, only the GMP which, up till now, was paid with the State Pension as all DB schemes did.

Ahh, that makes sense now, thanks. Bear with me, but does that possibly mean the consultation could say that an element of newSP won't be linked in future, but the rest will? Or, as the GMP element becomes part of the starting amount, the whole lot will still be linked, IYSWIM?

greenglide

There is no GMP component of nSP, nSP is just made up of

• nSP amount itself, up to £155.65 currently
• Protected payment (any nSP entitlement above the maximum (from the starting amount)
• Extra State Pension - increase from deferring etc
• Extra State Pension Inherited - increments inherited from a deceased spouse's AP, deferring etc.

To include the old GMP/COD calculations would be a huge undertaking, it would take years.

If it was decided to index "everyone" or even just public sector the sensible approach would be for the pension schemes to do it and get the money back from the government.

It looks as though LGPS would be expected to fund the 18 months or so themselves.

GunJack

So I'm still unclear why there is protection for 3 years into the newSP if there's no GMP element identified as part of the starting amount? What exactly is being linked & protected then?
Still learning about this stuff....

zagfles

The reasoning behind the choice of the Dec 2018 date seems a bit strange. I suspect the real reason is that it's generally people who reach SPA in that period, ie the couple of years after Apr 2016, who will be worse off overall, as a result of loss of GMP indexation.

Generally those who are/were in contracted out schemes who reach SPA after then will be better off as the ability to accrue further state pension outweighs the loss of GMP indexation.

rosehip

I'm glad the public sector is being looked after. I'm in a private scheme so my gmp won't be uprated but of course I'm only too pleased to work until I'm 90 to pay for the public sector increases.