No GMP indexation - really?

Nomercer

An update. So almost a year after first asking my pension fund administrator for details of the funds GMP indexation position I have finally received a document extract with some details. These reference the Pension Schemes Act of 1993 so were evidently created sometime after that. Am I correct that the the PSA of 1993 was the first introduction of the GMP concept?


(And thank you vaseymw for reminding me of the effects of compound interest!)

xylophone

PSA of 1993 was the first introduction of the GMP concept?

No.

https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN04956

hyubh

Nomercer wrote: »

So almost a year after first asking my pension fund administrator for details of the funds GMP indexation position I have finally received a document extract with some details. These reference the Pension Schemes Act of 1993

A completely generic reference - any contracted-out scheme could do the same.

so were evidently created sometime after that.

Incorrect.

Am I correct that the the PSA of 1993 was the first introduction of the GMP concept?

No, GMP was introduced in 1978.

And thank you vaseymw for reminding me of the effects of compound interest!

If your old scheme uses fixed rate GMP revaluation, then as explained earlier in this thread, you would not have had any increases on your GMP paid through your state pension for many, many years anyhow. You also need to net off any benefit from the introduction of the single tier system.

Nomercer

Thanks hyubh and other contributors to this thread.


For what it's worth my state pension starting amount has been determined under the old rules, this being a higher sum than it would be under the new rules, so the introduction of the single tier system doesn't seem to be a benefit here.


My original scheme increases were "as specified in the annual review orders issued in accordance with section 2 of the pensions (increases) act 1971". And in the early years I received various statements showing the increases awarded to pensioners each year. But yes, I failed to spot the ramifications of the April 2016 changes. I can only hope that the current political situation doesn't lead to a bout of high inflation.

hyubh

Nomercer wrote: »

For what it's worth my state pension starting amount has been determined under the old rules, this being a higher sum than it would be under the new rules, so the introduction of the single tier system doesn't seem to be a benefit here.

That doesn't follow. Under the old system, you couldn't 'cancel out' a lengthy period of being contracted-out with additional years contracted-in. The transitional rules covering the new state pension did away with this principle, i.e. 'full years' from 2016/7 to SPA (i.e. once your 'starting amount' has been determined) now count irrespective of whether they would have counted under the old system.

PS - I don't know whether you are in that situation or not. If you were only contracted-out for a short period, it's possible you aren't. However, a starting amount from the new rules would have definitely ruled it out.

My original scheme increases were "as specified in the annual review orders issued in accordance with section 2 of the pensions (increases) act 1971".

That's in accordance with increases for public sector schemes (https://www.legislation.gov.uk/ukpga/1971/56/contents). What's your scheme...?

And in the early years I received various statements showing the increases awarded to pensioners each year. But yes, I failed to spot the ramifications of the April 2016 changes. I can only hope that the current political situation doesn't lead to a bout of high inflation.

What is your GMP revaluation rate though...?

xylophone

When you left the scheme in 1985 were you given a statement of deferred benefits showing

GMP
Excess?

Does your Scheme use Fixed or Full Rate revaluation?

See

https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

When do you reach State Pension Age?

What exactly does your state pension statement say?

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

bearing in mind that the Basic State pension at introduction was £119.30 and the NSP £155.65

Nomercer

Thanks for your interest, here's some more information as requested. My employer was a subsidiary of British Airways called International Aeradio Ltd (IAL), sold to STC in 1983. I think they modelled their pension scheme on the public sector.

I can't find the GMP revaluation rate or method on any paperwork.

When I left I had a certificate of preserved benefits that just stated a figure that I would receive at state pension age, no mention of GMP or excess. It did state that the pension would increase in accordance with the scheme rules.

The pension started last year when I was 63 (generous, no quibbles with this!) and will be fully indexed until I reach 66 when the loss of GMP indexation kicks in.

My state pension is good (38 years of full contributions) and gives a COPE figure of about half my IAL pension. My concern remains if we have a spell of high inflation what looks like a pretty good pension will devalue.

hyubh

Nomercer wrote: »

Thanks for your interest, here's some more information as requested. My employer was a subsidiary of British Airways called International Aeradio Ltd (IAL), sold to STC in 1983. I think they modelled their pension scheme on the public sector.

BA was only privatised in 1987

I can't find the GMP revaluation rate or method on any paperwork.

It's important to identify what GMP revaluation method was/is used. Funnily enough, a private sector DB scheme having a public sector origin only poorly correlates to a public sector style treatment of GMP, which would imply 'full' rate (alias 'S21' or 'S148') rather than fixed rate).

The pension started last year when I was 63

Does this mean you are not working now, or that you are, and are in receipt of the occupational pension too...?

and will be fully indexed until I reach 66 when the loss of GMP indexation kicks in.

You mean 65? GMP comes into payment at the old state pension dates, since they were the current state pension - and therefore SERPS - dates when GMP was being accrued.

By the by, there may be another sort of adjustment, to actually break out the GMP in the first place. I'd suggest checking with the administrator for details on that - basically, when a pension with GMP comes into payment before GMP age, the scheme can do what it likes about the GMP component, and only needs to deal with it properly at 60 (for women) and 65 (for men).

xylophone

The pension started last year when I was 63 (generous, no quibbles with this!) and will be fully indexed until I reach 66 when the loss of GMP indexation kicks in

You had not previously mentioned that you are already drawing the pension.

I take it that this pension does not consist entirely of pre 88 GMP but of GMP and excess. It is usual for the statement of deferred benefits on leaving to show the GMP and excess.

It appears that the scheme is going to fully index the whole of your pension up to age 66 rather than age 65 (male GMP age which would have aligned with male SPA at the time when you became a scheme member).

At age 66 your pension will be split into pre 88 GMP and excess - as you say, the scheme is not obliged to index link the GMP after this point - the excess will revalue under scheme rules.

p00hsticks

Nomercer wrote: »

For what it's worth my state pension starting amount has been determined under the old rules, this being a higher sum than it would be under the new rules, so the introduction of the single tier system doesn't seem to be a benefit here.

Is your starting amount higher than the nSP maximum (currently £164.35) ?



If not, then you have the opportunity to increase that amount by earning/buying NI years post 2015-16 until the year prior to that in which you reach State Pension age, so could still end up with a higher weekly amount under the new rules than you would have under the old.