No GMP indexation - really?

Terron

Thanks for the responses.


I am male.
I joined the first scheme in 1989 and left in 1994 and joined the second one, which is a bit of a hybrid but the DB underpin will almost certainly apply. It was replaced by a pure DC scheme warly this millenium.



As I understand it the index linking of my DB pensions will be
a) inflation subject to a cap of 5% on the newer scheme minus its GMP.
b) inflation subject to a cap of 3% on both GMP parts

c) at the discretion of the current owners for the remainer of the first scheme.


It is from this forum that I have learned most about GMPs in particular the change to GMP indexation. I hadn't realized it was indexed in a different way to the rest of the scheme until a few months ago.

hyubh

Billopp wrote: »

I think you will find out the DWP have tried to justify the change by saying that people will gain by other changes which are not all true.

I'm pretty sure xylophone is aware of the issues . In the case of someone with an old private sector DB pension with 7% revaluation on their GMP and some years to state pension age, this justification will likely hold however (under the old system, it would be some years before the 7% falls behind full rate revaluation and increases kick in with the state pension).

If this is the case why are people in the public sector having their GMP indexation on GMPs paid via t their occupational pension if they reach state pension age prior to 6 April 2021.

The answer to your 'why' question is twofold:

1) Technically, it has always been the case that if a member did not get 'full' increases on their GMP once the state pension is included, then a public sector scheme was liable to make up the difference. Clearly CETV calculations (and for the LGPS in particular, employer contribution rates and charges) were not calculated on the basis that the normal situation would be that the scheme paid 'full' increases on GMP. However, the principle that a public sector scheme member gets 'full' increases overall (no more no less) wasn't dreamt up in the past few years.

2) Not treating GMP as excess, when the state pension no longer tracks contracted-out deductions, creates a sex inequality issue for public sector schemes that did not exist before, keeping in mind that so-called 'Barber equalisation' for excess pensions did not affect public sector schemes because they were gender-neutral in the first place (GMP, in itself, is not gender-neutral because it reflects the state pension of its time).

hyubh

Terron wrote: »

I joined the first scheme in 1989 and left in 1994 and joined the second one, which is a bit of a hybrid but the DB underpin will almost certainly apply.

You need to be a bit more precise - how was it 'a bit of a hybrid', surely it either was a hybrid or was not? And if it was, was this a DC scheme with a DB underpin? Or a pure DB scheme...?

As I understand it the index linking of my DB pensions will be
a) inflation subject to a cap of 5% on the newer scheme minus its GMP.
b) inflation subject to a cap of 3% on both GMP parts

c) at the discretion of the current owners for the remainer of the first scheme.

Statutory increases for excess in payment only started in 1997. This does not mean scheme rules failed to grant increases for service before then. However, this may have been in terms of them still being formally discretionary... or may not, all depends on the scheme rules.

As noted before though, it's important to distinguish between 'revaluation' between leaving and a pension becoming due, and 'pension increases' once on in payment. For public sector schemes this is a distinction without a difference, for private sector schemes, not so.

Terron

hyubh wrote: »

You need to be a bit more precise - how was it 'a bit of a hybrid', surely it either was a hybrid or was not? And if it was, was this a DC scheme with a DB underpin? Or a pure DB scheme...?



Statutory increases for excess in payment only started in 1997. This does not mean scheme rules failed to grant increases for service before then. However, this may have been in terms of them still being formally discretionary... or may not, all depends on the scheme rules.

As noted before though, it's important to distinguish between 'revaluation' between leaving and a pension becoming due, and 'pension increases' once on in payment. For public sector schemes this is a distinction without a difference, for private sector schemes, not so.

It is a DC scheme with a DB underpin on the core contribution. I paid extra so part of my fund is not covered by the underpin..I got an estimate this year so I have a fair idea of what it is worth amd what options are available for taking it.


For the earlier schme increases once it is in payment are discetionary for service prior to 1997. Since 2002 most years there has been no increase. In 2004 and 2008 there were increases of 1%. Thus has been raised with the ombusman and in parliament, but nothing has changed.

xylophone

I am male.
I joined the first scheme in 1989 and left in 1994 and joined the second one, which is a bit of a hybrid but the DB underpin will almost certainly apply.

Male GMP age is 65.

With regard to the first scheme, you are going to draw this pension at Normal Scheme Retirement Age but this is earlier than GMP age.

The question is how your scheme handles this situation and you need to check this with the administrator.


By way of example, look at how the Barclays Scheme does it

post 167 here

https://forums.moneysavingexpert.com/showthread.php?t=4736856&highlight=mikefloutier&page=9

After GMP age your scheme is not obliged to index link the post 88 GMP above 3%.

The NRSA of the second scheme is male GMP age but it appears that you intend to draw this pension early - this is likely to mean an actuarial reduction and possibly different treatment of the GMP aspect - again the Barclays example (post 101) may be of interest but you will need to check how your scheme rules work.

You may also wish to check whether there is any form of abatement/clawback at State Pension Age.

http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN01121

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

Billopp

Can anyone tell me if the new state pension statements that people request now mention that people will not receive GMP indexation on GMPs via their state pension? I believe the DWP send out a booklet with it which would be a good opportunity to tell people about the change to GMP indexation.so am interested to find out if the DWP are telling people about the change in legislation.

The other thing I would like to know is how you all found out about the loss of GMP. Indexation. Was it through DWP,your employer, newspaper articles,or through forums like this?.

I am fairly fortunate as my occupational pension is not reduced by abatement/clawback and have all my occupational pension indexed by my scheme. No adjustment is made for my GMP. On top of that my scheme did not have fixed rate revaluation either so consider my self very fortunate.

The reason I am interested in the subject is that I am trying to help some friends take a case to the Ombudsman regarding the DWP not telling people about the change in legislation regarding loss of indexation on GMPs. especially as it was not mentioned in Green or White Papers.The change has been done by stealth. In fact I am beginning to wonder if the law has actually been changed. so it is possible the DWP are not paying GMP increases without the authority of Parliament

greenglide

DWP are not paying GMP increases without the authority of Parliament

Unfortunately the DWP is doing exactly what the pensions act said.


You really need to differentiate between parliament/government who pass the laws and the civil service who implement them.


How many MPs who voted for this actually understood what this change was is another matter. Successive governments have never really understood whole GMP/COD mess.

Billopp

Can you please point me to where it was mentioned in the Act. I don't think the new state pension was actually voted on as it went through on the nod, so we don't know which way MPs voted on it.

How did you find out about the change to GMP increases legislation?

Terron

xylophone wrote: »

Male GMP age is 65.

With regard to the first scheme, you are going to draw this pension at Normal Scheme Retirement Age but this is earlier than GMP age.

The question is how your scheme handles this situation and you need to check this with the administrator.


By way of example, look at how the Barclays Scheme does it

post 167 here

https://forums.moneysavingexpert.com/showthread.php?t=4736856&highlight=mikefloutier&page=9

After GMP age your scheme is not obliged to index link the post 88 GMP above 3%.

The NRSA of the second scheme is male GMP age but it appears that you intend to draw this pension early - this is likely to mean an actuarial reduction and possibly different treatment of the GMP aspect - again the Barclays example (post 101) may be of interest but you will need to check how your scheme rules work.

You may also wish to check whether there is any form of abatement/clawback at State Pension Age.

http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN01121

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

I have checked my new state pension. I am a few pounds short of the maximum. I am trying to pay class 2 contributions for last years whch should be enough to reach the maximum.


I have spoke to the administrator of the second scheme. about GMP.
They said currently before payment it revalues at 4.5% per year.
If I take it at 60 as always planned I will get the money and it will be revalued like the rest of the scheme - CPI with a cap of 5% until GMP age.
After GMP age the cap will become 3%.


I am waiting for a callback about the other scheme.

Billopp

Can you please point me to where it was mentioned in the Act. I don't think the new state pension was actually voted on as it went through on the nod, so we don't know which way MPs voted on it.

How did you find out about the change to GMP increases legislation?