Deferred pension calculation

SamSJ

I worked for a company from January 1973 until 1982. My pension of 1200 was frozen for the duration. I was on a final salary pension. I received information in 2014 stating my pension breakdown.DOB 05/06/1951

I decided to take my pension at 63 years, I am 65 this year. I was quoted and received 2,688 pa with and expected GMP of 2,963 in June this year when I am 65. I am surprised that my original frozen pension has made so little considering it was re-valued from 1982 unitl 2014 at 8.5%. I have read in this forum that 1000 at 8.5% x 28 is making 9,876. approx

Have my previous employers, who are still active, got it wrong or have I

greenglide

My pension of 1200 was frozen for the duration.

It wasnt fozen, it was deferred.

Are you saying the the pensionable salary at date of leaving was £1,200, the CETV was £1,200 at leaving or the expected pension was £1,200 per year.

The pension would surely be indexed by RPI, CPI or similar as specified in the scheme rules. Was the GMP revalued by 8.5% and now the GMP is greater than the pension itself so there is no "excess"?

This would mean that if you SPa date is after 6/4/2016 you would get no index linking of the pension as it is all pre 87 GMP (unless this this is a public scheme).

enthusiasticsaver

Is this a Barclays pension? There does seem to be a difference in expected GMP and administrators are decidedly unhelpful when it comes to deferred pensions.

PensionTech

My pension of 1200 was frozen for the duration.

It wasnt frozen, it was deferred.

Actually some of it probably was frozen in this case - that will be exactly the issue.

In 1982, you would have had only around 4 years' of GMP accrued. This will almost certainly not account for the full £1200 on leaving. The £1200 will instead have been a preserved pension based on your final service and salary, only some of which was GMP. Let's say £200 was GMP and the remaining £1000 was the excess over the GMP - I will imaginatively call this "excess".

Now, although "excess" pensions for people leaving in recent years have to be increased by a minimum percentage (with reference to inflation), excess pensions for people who left their schemes before 1986 got no such protection. And - worse - the increase on your GMP could be offset against your main scheme pension. So if we look at the figures:

£200 GMP x 1.085^33 (assuming there are around 33 complete tax years between leaving and age 65) = £2953 (give or take)
Increase on GMP = £2753
£1000 excess, not revalued = £1000

So your GMP increase eats up all your excess and that's all that you have left when you get to GMP age. This is called "franking".

In fact it's slightly different again for you, because you took your pension early, so there's even less of a requirement to make sure that anything other than your GMP is covered.

What's more, the rate of 8.5% might not even apply to you - schemes could choose to revalue GMPs in deferment by what was called Section 21 Orders (now called Section 148 Orders). These were equivalent to increases in national average earnings indices; fixed rates were, I believe, an attempt to imitate Section 148 Orders. If this is the method of revaluation used by your scheme, then a £200 GMP would now be worth £977.60. So if your GMP at 65 is £2688 as you say, then it might have been worth in the region of £550 when you left - and the increases would still have eaten up your excess.

As you can see, it would be useful to know what the different elements that made up your pension were worth when you left the scheme in 1982 - but using my own GMP calculator and desperately trying to max out the NI contributions between the dates you've given, I can't reach anything higher than £690, so I think it very unlikely that the £1200 was all GMP. Some will have been excess, and that will have been franked. That will be why it's not as high as you expect now.

xylophone

https://ompensions.co.uk/media/255935/kb-franking.pdf

may be of interest.

With regard to your occupational pension, do you know the GMP/excess split of your £2963 to be received in June?

Your scheme has no obligation to index link your GMP from age 65 as it is all pre 88.

Have you obtained a new state pension statement?

SamSJ

Thanks all