No GMP indexation - really?

Nomercer

Two apologies: yes I did mean 65, I was relying on my memory, not always a reliable witness and yes I should have mentioned I'm already drawing this pension. P00hsticks my forecast starting amount is a little above the nSP maximum.


Thanks everyone.

MikeFloutier

I have a final salary DB pension, from Barclays, that's been in payment since my 60th.

Since I reach my GMP date in a few weeks I'm currently waiting to find out how much Barclays plan to increase my pension (reflecting it's 7% pa latent revaluation) at this transitional stage.

I was interested to read about CETVs and wondered if these could be applied for when the pension was already in payment?

I had previously considered this briefly and written it off BUT, having read Dairy Queen's account, I thought it might be worth revisiting.

AlanP_2

MikeFloutier wrote: »

I was interested to read about CETVs and wondered if these could be applied for when the pension was already in payment?

I had previously considered this briefly and written it off BUT, having read Dairy Queen's account, I thought it might be worth revisiting.

No, only available before commencing pension.

DairyQueen

MikeFloutier wrote: »

I
I was interested to read about CETVs and wondered if these could be applied for when the pension was already in payment?

I had previously considered this briefly and written it off BUT, having read Dairy Queen's account, I thought it might be worth revisiting.

I believe that you can't transfer once you are within a year of scheme retirement age (that rule applied to my scheme but I'm not sure if it's generic). Afraid transfer is also not an option once the pension is in payment (as AlanP advises). The latter is definitely generic.

MikeFloutier

Thanks guys, to be honest my main interest is currently GMP revaluation and it's close relative anti-franking, but once I've settled that I'm sure my thoughts will turn to on-going pension increases:)

Billopp

Since contributing to this thread I have found out additional information about the state being responsible for paying part or all of a persons GMP indexation after they reached state pension age which has been denied by Steve Webb when he was the Pensions Minister and Officials in the Parliament and DWP have not told people about loss of GMP indexation.

How is it that not a single pension professional or member of Parliament picked up on loss of GMP indexation before the pension Act 2014 became law.
From reading this I hope you agree that GMP indexation was paid via the way the DWP calculated a persons state pension age under the old state pension and that the

First start by reading the link to pensions Bill 2011 MPs' information pack which I don't think you will find by searching the internet as I think the DWP took it off the web as they did not want people to find out about consolidation of GMP indexation after a person reaches state pension age under the Pension Act 2011..

Pensions Bill 2011
MPs’ information pack

To be read in conjunction with the Pensions Bill, as read for a first time in the House of Commons on 27 April 2011, and accompanying Explanatory Notes

Version One 19 May 2011 https://webarchive.nationalarchives.gov.uk/20110601202012/http://www.dwp.gov.uk/docs/pensions-bill-mpip.pdf

The pages to read are 19 to 20 which explain very clearly how GMP indexation was calculated under the old state pension and confirms that the some or all of a persons GMP indexation was provided by the state which has since been denied by the DWP even though they compiled the MPs' information pack.

16. The following example explains:

a. Before uprating:

AP =£200.00 Less Pre-88 GMP: £100.00 Post-88 GMP: £100.00+ =£200.00- =£0.00 Total AP payable = £0.00 (£200 – £200 = £0.00).


b. After uprating (where CPI is 5%):

AP (increased by CPI of 5%) = £210.00

Less Pre-88 GMP = £100.00 (frozen) Post-88 GMP = £103.00 (increased by max 3%)+ = £203.00- =£7.00 Total AP payable = £7.00 (£210 – £203 = £7.00)


17. The £7.00 AP payable is how all the indexation of i) the GMP from 1978 to 1988; and ii) anything above three per cent for post-1988 GMPs, is provided by the state.

Now read pages 22 to 28 which are about consolidation of contracted out deductions ie GMP indexation after a person reaches state pension age under the 2011 pension Act which became law in November 2011 . and especially paragraphs 21 to 23 and 27.

What consolidation will mean for pensioners who have been contracted-out

21. Without consolidation it is virtually impossible for someone who contributed to a contracted-out pension between 1978 and 1997 to work out what their AP would be at retirement and after retirement. Consolidation goes some way to improving this situation, although it is very difficult to identify what is actually happening during the consolidation process.

22. Importantly, consolidation changes the pattern of payments an individual will receive if they have been contracted-out. Previously, a typical pattern of entitlement after State Pension age would see the gross AP being uprated at a higher amount than the Contracted-Out Deduction. Year on year a pensioner would see a growing amount of net AP (paid by the state).

23. Consolidation will see a change in this pattern: pensioners will receive more net AP at the beginning of their claim, and less at the end – flattening and simplifying the amounts they recei

27. Summary of Effects for Pensioners who have been contracted-out: Someone who lives exactly the average life will receive the same value of AP with consolidation as they would without, although the income stream will be different. Someone who has a shorter life than the average will get more with consolidation. Someone who has a longer life than average will get less, but will benefit most from the earnings uprating of basic State Pension. Everybody should have at least as much money in retirement compared to what they would receive were the pre-2008 state pension system rolled forward.

Now read

Pensions Act 2011
You are here:
2011 c. 19 Explanatory NotesOpen full notes
http://www.legislation.gov.uk/ukpga/2011/19/notes
Pensions Act 2011
2011 CHAPTER 19
Introduction

1.These explanatory notes relate to the Pensions Act 2011 which received Royal Assent on 3 November 2011. They have been prepared by the Department for Work and Pensions in order to assist the reader of the Act. They do not form part of the Act and have not been endorsed by Parliament.

Section 3: Consolidation of additional pension

42.In payment contracted-out pension rights are offset against additional state pension entitlement built up before 1997, meaning a number of people gain additional state pension for that period at some time after pensionable age. This is because differences in the way private pension schemes increase rights in accrual and pensions in payment, compared to the state scheme, can mean that at state pension age a person’s additional state pension entitlement for that period might be small, or non-existent, but increase later on in retirement.

43.Under consolidation, actuarial factors would be applied to a person’s contracted-out pension rights in order to smooth the disparities in entitlement that occur during retirement. This is likely to affect around 11 million people who built up contracted-out pension rights between 1978 and 1997. As a result, there are short-term costs to the Exchequer associated with consolidation, in that some additional state pension entitlement for the pre-1997 period would be brought forward to state pension age to smooth income over retirement.


The following is from a debate in the House of Lords which mentions consolidation of contracted out deduction increases after a person reaches state pension age under pension act 2011 which became law on 3 November 2011.
Amendment 13 withdrawn.

https://hansard.parliament.uk/Lords/2011-03-01/debates/11030159000106/PensionsBill

Schedule 3: Consolidation of additional pension

Amendment 14

Moved by

Lord McKenzie of Luton


Lord Freud
Before I go into why we need this flexibility, let me summarise the original intention behind consolidation. It served two purposes. First, it repackaged past rights to earnings-related pensions into a single cash value. Secondly, for around one-third of people with some contracted-out rights in private pension schemes, it smoothed the disparities in payment of additional pensions that occur during retirement. The redistribution of payments helps to overcome differences in indexation between additional pension and contracted-out schemes. ​Under the 2008 measure, this brings forward costs of up to £210 million per year, but is cost-neutral in net present value terms.

None of the provisions in the Bill change the methodology for consolidation from that set out in the Pensions Act2008. Having reminded noble Lords of the basics, I will not take any more time going through details that are not relevant to this Bill, because a more digestible technical note is available in the Peers’ information pack. Because I have forgotten the outcome of discussions between government Ministers and actuaries, I undertake to write on that. No, I can inform the noble Lord that the outcome of that debate was that it would be a ministerial, not a purely external actuarial, decision.

I hope everyone reading this and attachments can understand what I am saying.

DT2001

The problem, as I see it, is that the pension system needed simplifying. In the process there will be winners and losers but due to the complex nature the provision of information is difficult.
I asked for a quote (in May 2011) to draw my Deferred pension in Nov 2011. When I returned the forms about 6 weeks before the proposed date I was told my actual DB pension was 15% lower as in the meantime the administrators had concluded that their treatment of GMP was too generous. I asked why Deferred pensioners weren’t told and was advised that, after taking legal advice, it was concluded that more would be confused than enlightened! As you would expect I wasn’t amused however having utilised this forum last year and continued to follow threads I can sympathise with administrators of pension schemes including the Govt./DWP.
On this forum there are well informed people and those seeking more information and yet few would be able to explain GMP in all of its complexities. It is almost a case of each person being affected differently because of the variables of age, earnings, pre and post 88 contributions, qualifying years for SP, scheme membership rules regarding growth rates in deferral, anti franking, length of time in deferment, future inflation etc.
In isolation it appears wrong that there is no indexing of pre 88 benefits (mine at 65 will be £4K+) however should I expect to get the same SP as someone who has no GMP or paid higher NI for being contracted in?
My DB pension will decline in real terms after GMP age and a SPA reduction. The decline depends on inflation. It is not how I understood it when provided with my redundancy guidance notes in 1995 however I am grateful for whatever comes my way.
I think I am in a win/win position, more money short term and if I reach the point of losing out I’ll have defied the average life expectancy!