No GMP indexation - really?

xylophone

https://www.nao.org.uk/wp-content/uploads/2016/03/The-impact-of-state-pension-reforms-on-people-with-Guaranteed-Minimum-Pension.pdf

15 There has been a lack of clear information for people with Guaranteed Minimum Pensions. While the Department has issued factsheets on the new state pension, it has provided limited details on the circumstances in which people with Guaranteed Minimum Pensions could end up worse off under the new arrangements. It believes it could be misleading to show people how they might be affected by one aspect of pension reforms in isolation, without considering the combined impact of changes. The Department has no therefore provided information directly to people with Guaranteed Minimum Pensions about their overall state pension income (paragraphs 4.6 to 4.9).

xylophone

https://publications.parliament.uk/pa/cm201516/cmselect/cmworpen/926/92605.htm
may also be of interest.

Billopp

Thanks for coming back

Let me start by saying that the only reason the NAO did their reort was because I and a friend wrote to Margaret Hodge the then Chair of the Public accounts Committee in January 2015.
Is the report from the NAO when you first found out about loss of GMP indexation.

She replied on the 25 Mmarch 2015

I would still be interested to know if you have managed to find in the legislation about the NSP a paragraph that mentions loss of GMP indexation.


. In her reply she said " However the NAO has noted there are no details or scenarios published which an individual would receive less pension following the move to the NSP, and there are no scenarios published which reflect the potential impact of the removal of GMP indexation increases on contracted-out pensions


C ommunications with National Audit Office about lack of information about the new state pension starting 6 April 2016

If the link does not work you should be able to find my request on the web site for What do they know

C. Thompson made this Freedom of Information request to Department for Work and Pensions
C ommunications with National Audit Office about lack of information about the new state pension starting 6 April 2016

https://www.whatdotheyknow.com/request/c_ommunications_with_national_au#incoming-818385[/URL]



rThe Department’s communications on the impact of changes
4.6 Several members of the public have contacted us regarding the implications for
Guaranteed Minimum Pensions of introducing the new state pension. In particular,
correspondents have raised concerns about the way Guaranteed Minimum Pensions
will!be uprated, and the quality of communications from the Department about how
people will be affected.
4.7 Communicating the impact of pension reforms is not straightforward. Pension rules
are complicated and it is not easy to generalise about the impact of policy changes on
individuals, given the number of factors that can affect their entitlement.
]In March 2015 we wrote to the Department to highlight a lack of publicly available
information and guidance on the scenarios under which pensioners might receive less
pension under the new state pension. [/COLOR][/COLOR][/COLOR]We found that it had not communicated the
scenarios in which people could be worse off. We recommended that the Department
review its communication strategy and distribute clear guidance, including scenarios
relating to the end of contracting out and the indexation of Guaranteed Minimum
Pensions’ increases

DairyQueen

Billopp wrote: »

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

GMP, and the changes to indexation, turned-out to be a major factor affecting my deferred, non-public sector, DB scheme. I knew zero about GMP until I began looking in detail at my deferred benefits in 2016. Thanks to this forum (xylophone in particular) I was able to establish the meaning of GMP, how I was affected by revaluation, and (more importantly for me) by the removal of the government's indexation support of this part of my DB pension.

I was at no time made aware by the scheme, any government agency or media coverage that my DB pension, once in payment, would no longer be fully index-linked (I was in the 'up to 3%' post-1988 cohort). However, I did benefit from (what turned out to be) a great revaluation rate (7%).

The removal of the indexation guarantees detailed on my leaving benefit statement (that I had blithely taken as gospel), plus a poor recent history of discretionary increases on the excess once in payment, were factors that played into my decision to take the enhanced CETV offered by the scheme last year. Not the only factors, nor the major ones, but they helped weigh the balance in favour of transferring out.

I winder just how many people remain blissfully unaware that their DB pensions may be worth a lot less than they were led to believe decades ago, once in payment. In my case, both the scheme and the government have welched on their indexation 'contracts' and both have done so without informing those affected.

Thank you xylophone and MSE forum. Ignorance is definitely not bliss.

xylophone

Is the report from the NAO when you first found out about loss of GMP indexation.

No - this was being discussed on the forum back in 2013. see post 5

https://forums.moneysavingexpert.com/showthread.php?p=60134395#post60134395

greenglide

I winder just how many people remain blissfully unaware that their DB pensions may be worth a lot less than they were led to believe decades ago, once in payment. In my case, both the scheme and the government have welched on their indexation 'contracts' and both have done so without informing those affected.

The government has, sort of, but I don't see how the scheme can be blamed for this?


Of course the state pension never said the it would meet all of the indexation. Under the old scheme you only get indexing once the AP that would have been paid if you hadnt contracted out is greater than the COD. In many cases this will never happen.


Since the public sector schemes are indexing the full pension (for people retiring up to 2021 now?) I believe they (and I am in that group) are actually better of than they would have been as they are getting full indexation without waiting for the two figures are equal.


I believe this is due to complications due to pensions equalition.


The whole thing is a mess but very few people realise this so there was no way of really stopping it.


The nSP is a deeply unfair system in many ways with the gloss of the £147 per week for all hung out as bait.

xylophone

Of course the state pension never said the it would meet all of the indexation. Under the old scheme you only get indexing once the AP that would have been paid if you hadnt contracted out is greater than the COD. In many cases this will never happen.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/504437/government-response-pensions-act-2014-abolition-of-contracting-out-order_2016.pdf

See page 7 onwards of the above.

The government appear to think that the fact that some people would not have benefited from the uprating difference calculation (for those wanting an illustration of this see post 21 here)

https://forums.moneysavingexpert.com/showthread.php?t=4532605&page=2

is a reasonable excuse for disadvantaging those who would have done?

They welshed on the deal for these people and for those retiring within a short period of the introduction of the new state pension ( particularly those with only pre 88 GMP) this was utterly unjust.

Terron

Billopp wrote: »

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?.

Going back through my documentation I found a sentence mentioning it in a report from one of my schemes in 2016. But I did not realize its significance until reading this thread.

DairyQueen

greenglide wrote: »

The government has, sort of, but I don't see how the scheme can be blamed for this?/QUOTE]
I didn't make clear that the benefit statement (on leaving) stated that the excess would be increased by RPI up to 5%. At some point (unknown, I was never informed) the scheme decided that this would change to 'discretionary increase'. In the five years prior to 2016 the scheme had missed giving any inflationary increases, on excess in payment, for three years and below CPI increase on two more years.

I appreciate that I am fortunate to have had any DB provision but I considered the benefit statement to be a contract. Apparently not. Thus my comment regarding both scheme and government welching on the deal.

greenglide

I didn't make clear that the benefit statement (on leaving) stated that the excess would be increased by RPI up to 5%. At some point (unknown, I was never informed) the scheme decided that this would change to 'discretionary increase'. In the five years prior to 2016 the scheme had missed giving any inflationary increases, on excess in payment, for three years and below CPI increase on two more years.

I considered the benefit statement to be a contract

the rules of the scheme in conjunction with the law are "the contract".


Maybe the increase up to 5% was always discretionary? They are not allowed, normally, to take such things away except for years still contributing and not back dated.

Seems odd.