GMP explained

where_are_we

My wife (64) has recently started taking a State Pension of £135.60 per week, which has resulted in her LGP being reduced from £263.77 /month (Pension 103.85, Pension Increase 49.75, Pre SPA GMP 110.17) to £154.26/month (Pension 103.85, Pension Increase 50.21, Pre SPA GMP 0.20). She worked for 12 years 1975 - 1987 in LG and began receiving her LGP at 60. She was contracted out during this time and this resulted in her SP being reduced by £23.36. I would be very grateful if someone could explain GMP and her LGP reduction.

GunJack

LGPS? there's several on here who could advise.... JohnDough and Silvertabby spring to mind

xylophone

In the LGPS it is normally the annual increase to the pension that is affected by GMP after SPA is reached, for those who attained it before 6 4 2016.

https://www.lgpsmember.org/more/PI-GMP.php

As far as I know, (members mentioned above will clarify), LGPS does not apply abatement / clawback at SPA - see here

http://www.web40571.clarahost.co.uk/archive/saga/2000_and_before/990202.htm

What tax code is being applied to your wife's LGPS now that she has started taking her state pension?

Is it correct?

xylophone

What tax code is being applied to your wife's LGPS now that she has started taking her state pension?

Is it correct?

See https://forums.moneysavingexpert.com/discussion/5691007

Silvertabby

Looking at the break down figures quoted by OP I don't think that income tax is the problem here, especially as no tax may be due (total pre adjustment pensions total just over £10K per annum). (The LGPS does not apply clawback/abatement).

What does apply, however, is the NI Modification for those who were members of the LGPS between April 1948 and March 1980, who also paid reduced NI.

In the case of a woman, GMP age is still 60 - so the pension administrators have to make the NI Mod adjustment to both the pension and the GMP at State pension age.

So far so good - except the total reduction is way more than any figures I've seen (usually max of £5 or so per month).

Pure guesswork here, but it looks like the administrators may have deducted all of the GMP cost of living increases, instead of just the increases from age 60?

Well worth a phone call to ask.

where_are_we

Many thanks - Tax code 28/4/17 Pre SPA 330T and Tax code 31/7/17 post SPA 402N M1. My wife does not pay any income tax. She phoned up last week, enquiring about the reduction of her LGP, and they are going to get back to her with an explanation.

xylophone

Those tax codes are rather odd - you know the explanation?

https://www.gov.uk/tax-codes

xylophone

https://www.cornwall.gov.uk/jobs-and-careers/cornwall-pension-fund/pensioner-members/reaching-state-pension-age/what-is-ni-modification/


https://www.yourpension.org.uk/Files/Files/Library%20Item%20Documents/Union%20st%20docs/Information%20for%20new%20pensioners%20Oct%202014%201.pdf

I found the above - does your wife's authority produce such a booklet?


Reduction of Pension at State
Retirement Age

If you ceased to contribute to the
Local Government Pension Scheme
before 1st April 1998 and retire before
attaining State retirement age and
if you started contributing to the
Local Government Pension Scheme
before 1st April 1980, you will find
that there will be a small reduction to
your pension when you reach State
retirement age.
This reduction is known as National
Insurance Modification and applies
because, until early 1980, contributors
to the Public Service Schemes paid a
slightly reduced (‘modified’) pension
contribution.
The intention of this modification
was to eliminate some of the overlap
between the occupational and the
State Pension schemes, but this
approach was abandoned in 1980 and
has not applied to service since that
date.
Due to a further change in legislation,
if you ceased to contribute to the Local
Government Pension Scheme after
31st March 1998, National Insurance
Modification will not apply in your case
even if you have service before 1st
April 1980.
If you are already in receipt of
Pensions Increase when your pension
is reduced due to modification, the
Pensions Increase will also be reduced
proportionately.

As Silvertabby says, the reduction you describe ( some 58%) can hardly be described as small.

GunJack

maybe someone moved a decimal point when calculating it??

Silvertabby

maybe someone moved a decimal point when calculating it?? Posted by GunJack

That's what happened to me when I retired and moved my tax code to my Armed Forces pension - and was immediately hit with a demand for over £2K underpaid tax.

I queried it on the grounds that I knew it wasn't right - and, after a lot of humming and haa-ing I was told 'sorry - you only owe £2.20' !