Calculation of GMP?

goodValue

I thought that, though having to adhere to government guidelines, a pensions schemes rules dictated the calculation of GMP.


My pension scheme now tells me that the GMP figure will depend on the values they get from HMRC.


Can anyone please throw some light on this?

Silvertabby

GMP is as notified by HMRC.

xylophone

See https://forums.moneysavingexpert.com/discussion/4532605

post 32 and 33.

goodValue

Thank you xylophone.
I have looked at the post you mentioned, but my lack of knowledge in this area meant that I couldn't relate this to my situation.
However, in post #28 you say:


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.


I believe that my GMP has increased at a Fixed Rate, and this is why I don't understand why HMRC get involved.
After all the fixed rate revaluations have occurred , is there then a modification by HMRC?

xylophone

See post 23 in same thread.

HMRC get involved whether fixed rate, full rate or any other rate - it is they who supply DWP with the figures.

You will note that in howy's case, a mistake had occurred and HMRC had initially calculated his figures on the basis that Fixed Rate had been used.

See post 12 in thread.

In fact, his scheme used Full Rate which made a difference to his payments.

He was initially told in 2013 that his COD (fixed rate ) was £133.56 which reduced his pre 97 AP to NIL - in fact, HMRC had advised DWP of the wrong figure. it should have been £98.82 (Full Rate) which gave him AP of a couple of pounds or so.

With regard to your own situation, have you seen

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

and

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/512799/your-state-pension-statement-explained-dwp042.pdf

goodValue

I think we've been talking at cross purposes.
I'm not questioning the COD calculation or anything to do with the State Pension, I was asking about the Occupational Pension calculation.
As the GMP calculation is done with a fixed interest rate, then isn't this just the same as money put into a fixed interest account; the final sum is dependant on only the initial sum, the interest rate, and the time period.
The figures previously given to me by the occupational pension scheme have been based on this type of calculation, as far as I know.
So how do HMRC get involved after this fixed interest calculation has been made - what is it that I am missing?

neilvw

The scheme has to reconcile its GMP records with those held by HMRC. In other words they have to agree the starting amount of GMP, before any revaluation is applied.

xylophone

When the state retirement pension came into payment, HMRC used to send the Scheme member a letter (CA 1627)


......our records show that etc etc

It was accompanied by a sheet detailing the weekly contracted out deduction , the name of the scheme, and the years contracted out.

However, see

See https://www.barnett-waddingham.co.uk/media/filer_public/6b/af/6baf547b-4772-4680-bf3a-ce77808e2455/gmp_reconciliation_briefing_note.pdf

re what is to happen going forwards.

goodValue

So the original value of the GMP held by the pension scheme was different than the value held by HMRC, and this only comes to light at the time the pension is taken (over 30 years later in this case).


Would this also explain why the Excess over GMP portion has been reduced from a value given 2 months before the pension was to be taken?

neilvw

If total scheme benefit is the same, if GMP has gone up the excess might well have gone down.

goodValue

Both the GMP and the Excess over GMP values have been reduced.

So does this mean that the values given by HMRC can affect the Excess over GMP value?