GMP and deferred pension

DT2001

Sorry for delay in replying I have been returning from Spain via Geneva and an early morning English Channel ferry crossing. So I’ll answer post 82 and then read on.
Pension was £6532.46 at 1/11/2011.
I had a quote in 6/2011 which stated £6570.95 or £6532.46 and lump sum of £745.54
I returned the forms and then received a letter stating £6532.46 and lump sum of £2903.52.I was away when the letter arrived and the money had been paid before I read about it so just assumed that it was ‘something’ to do with NI as the original letter had a large stamp subject to NI verification.

In August 2011 I was advised that my deferred pension stood at £8383.43 inc GMP of £1339.
I have written on that letter £8735 and £7396 so maybe I was verbally advised of the figure for November - the increase being the annual rise?

I realise I relied too much on the expertise of the administrators and didn’t know the questions to ask.

MikeFloutier

DT2001 wrote: »

Sorry for delay in replying I have been returning from Spain via Geneva and an early morning English Channel ferry crossing. So I’ll answer post 82 and then read on.
Pension was £6532.46 at 1/11/2011.
I had a quote in 6/2011 which stated £6570.95 or £6532.46 and lump sum of £745.54
I returned the forms and then received a letter stating £6532.46 and lump sum of £2903.52.I was away when the letter arrived and the money had been paid before I read about it so just assumed that it was ‘something’ to do with NI as the original letter had a large stamp subject to NI verification.

In August 2011 I was advised that my deferred pension stood at £8383.43 inc GMP of £1339.
I have written on that letter £8735 and £7396 so maybe I was verbally advised of the figure for November - the increase being the annual rise?

I realise I relied too much on the expertise of the administrators and didn’t know the questions to ask.

Thanks Tony, these figures seem to make sense.

£6532.46 for ERD and £8383.43 for NRD basis (both as at 2011) are both very close to my estimates.

I'll update and re-label my "page 10" schedule asap (wife's birthday tomorrow) but, looking at it quickly, I still feel you're looking at a £4,000 step-up at GMP date in 2025.

MikeFloutier

Here is a link to the latest version of the "page 10 booklet" - https://drive.google.com/open?id=1ZSjpCNC7RvuSw7EmCuRYRI7L3RlpPeqr

It's pretty much all based on actuals or the same assumptions known to be used by WTW; except that..

The really big assumption is that the 2nd step-up, i.e. at GMP date, is handled in the same way as for NRD situations. But since it would be totally unreasonable not to it must be ok.

Also, bearing in mind that there is an obviously planned modus within WTW to avoid paying the obligatory step-ups, at GMP date, for NRD situations, THEN it follows that this modus would also apply to ERD.

The big giveaways are:

1. That those who pursue their rights get them; eventually, and
2. The construction of the "page 10 booklet item"

Anyway, please, please do check my figures!

xylophone

The really big assumption is that the 2nd step-up, i.e. at GMP date, is handled in the same way as for NRD situations.

Exactly so.

And really one despairs of getting any accurate information out of WTW.

And do they ever actually read the letters that are sent to them?

Example post 22 (reply to DT from WTW)

From reviewing the calculation you have presented the figures do look relatively in line with what we would expect to pay you upon reaching GMP age.

but DT says

WTW's latest reply is below to an email with 4 questions only one of which is replied to. I did not provide a calculation so do not understand the 3rd paragraph...

Perhaps he ought to offer them your worked example?:)

MikeFloutier

xylophone wrote: »

Perhaps he ought to offer them your worked example?:)

That's exactly what my friend and I did, WTW then simply confirmed our estimates; and, in his case, paid it, when the time came.

I think the main reason that this approach is effective is that WTW are familiar with it since they designed it. All they have to check is that the source figures and various calculations are correct.

Also, being a template (complete with guidance notes), it helps us to correctly calculate our pensions.

This is why I think it's well worth the effort to check the "page 10" figures thoroughly.

DT2001

Apologies to hyubh for adding to this thread that appears to go round in circles. I have reached a few occasions when I thought I understood exactly my own GMP situation however I realise I am only still getting towards the light at the end of the tunnel. (Maybe the email below and my further comments will help explain why I/we seem to circle).

Happy birthday to Mrs F and many thanks for all your calculations Mike and Xylophones comments/guidance.

Full email from WTW of 6/7 will be on next post

DT2001

Whole email from WTW of 6th July with my questions (Numbered as cannot get different colours and do not know how to add boxes as many of the posters do? For some clarity I have put a few $$$$ after the end of my questions.

Further to your email on 29 June 2018, I can confirm that the your GMP element of your pension does not affect your tax free cash.

(1) It did alter the amount I could commute $$$$

Please see the below wording for more understanding on how your early retirement works;

If you choose to take early retirement from the Scheme, a test is carried out to ensure that upon reaching age 65 your total pension amount would be enough to cover the level of GMP that you are entitled to.

(2) Presumably just to see if you can draw your pension early without the Trust having to make a step-up? $$$$

In order to calculate an early retirement pension, your excess, or non-GMP, benefits are revalued to the date the calculation is produced and then assumed future increases are applied up to your Normal Retirement Age (NRA) of 60. Your GMP (as at your date of leaving) is then added to this value and an early retirement reduction factor is then applied to these benefits. This gives you your Total Pension amount (at your early retirement date).

(3) Why add in future presumed increases? If this is correct the method changed somewhere in 2011 (I guess). It used to be simply(I have a copy of a colleagues letter in 2003 showing how to work out an ER figure) value at ERD multiplied by early retirement reduction $$$$

If you chose to take normal retirement the value of your excess benefits are revalued, this time using known increases, up to your NRA and the value of your GMP is then added to this value to give your Total Pension amount as at age 60. Your GMP benefits are not revalued before age 65, regardless of whether you take early or normal retirement.

Between your retirement date and your GMP payment age (65), your Total Pension is increased in line with the Retail Price Index (RPI) capped at 5% each October.

Upon reaching age 65, your GMP is incorporated into the total value of your pension and is not added on top.

(4) Wrong or just very poorly worded. the paragraph below about 'test' should be here as a starter $$$$

Therefore, your pension is split into three sections, and increased as follows:

Non-GMP (increased in line with RPI capped at 5% each October)
Pre 1988 GMP (no increases applied by the Scheme)
Post 1988 GMP (increased in line with CPI capped at 3% each April)
Total Pension as at 65

I appreciate that it may appear that your excess value is being reduced to incorporate your GMP into your pension. However, your GMP value is already included in your Total Pension when you retire but can only be broken down, as shown above, upon reaching age 65.

However, as your GMP benefits could receive a large increase when you reach age 65, a test is carried out to determine whether your benefits are entitled to receive a ‘step-up’. This test involves comparing the increases applied to your pension between your actual retirement date and age 65 against the increase in the GMP. If the increase in the GMP is higher, then the difference is given to you as a ‘step-up’ in your benefits. The example in page 10 of the ‘What happens to your pension when you leave Barclays’ booklet is demonstrating a ‘step-up’.

An early retirement calculation does this ‘step-up’ test immediately at your actual retirement age. It projects the future increases applied to your pension based on assumptions provided by the Scheme Actuary and then compare this to the GMP that will come into payment at age 65, which is known as it revalues at a fixed rate. If the value of your GMP is higher than a ‘step-up’ will be given at your retirement date.

(5) To me it looks like a mess - (A) GMP is not due until 65 so why take into account? (B) This is not mentioned above in the calculation of an early retirement pension.
Surely what should happen is at ERD you get pension value * actuarial reduction and then at 65 GMP increase less actual increases (partial franking?). Maybe the variations I have asked for from WTW will help. $$$$

The normal retirement calculation does not take this into account and the benefits that would be paid are those revalued to your normal retirement age, as stated above. The ‘step-up’ test is then carried out when you reach age 65 and your pension would be adjusted accordingly, in line with the example on page 10 of the ‘What happens to your pension when you leave Barclays’ booklet.

All of the above information is based on current pension legislation and the current Trust Deed and Rules of the Scheme. These can change at any point in the future and due to this we are unable to confirm whether your benefits will receive a ‘step-up’ at GMP payment age or not.

(6) We as pensioners are not asking for confirmation however WTW will not produce anything with assumptions. Why not if we what assumptions are made? $$$$


I hope this clarifies how your GMP benefits are treated but if you have any questions,

(7) NO

Apologies again to hyubh but I am still trying to break out of the circle.

DT2001

https://www.ompensions.co.uk/media/255935/kb-franking.pdf

This link from xylophone suggests all of the excess can be franked. So differs from the worked figures.

A letter from Barclays in 6/2011 said GMP had been increased annually and payable immediately but in future would become payable in full at 65.

Mike did your colleague whom you assisted get the correct figure take ER or retire at NRD?

xylophone

This link from xylophone suggests all of the excess can be franked

The link does indeed say

Early Retirement Style Franking If a member retires early, then all bets are off as far as anti-franking is concerned. The scheme need only test that GMP is covered at GMP age and the entire excess pension can be franked to provide for this

And WTW advised you that "anti franking" did not apply to your pension.

However, while the link says "can" it does not say "will" so that the decision is down to the individual scheme.

You have tried (repeatedly it seems) to get an answer to the question as to whether or not full franking would apply in view of the fact that you took early retirement. (you asked whether the example on page 10 of the booklet would apply as you took ER).

If you cannot get a satisfactory answer from WTW (and it does not appear that TPAS have answered this question either), you do have the option of approaching the Trustees?

MikeFloutier

DT2001 wrote: »

https://www.ompensions.co.uk/media/255935/kb-franking.pdf

This link from xylophone suggests all of the excess can be franked. So differs from the worked figures.

A letter from Barclays in 6/2011 said GMP had been increased annually and payable immediately but in future would become payable in full at 65.

Mike did your colleague whom you assisted get the correct figure take ER or retire at NRD?

1. I can't see any foundation for the statement, regarding ERD anti-franking, that "all bets are off".

The 1993 act sections 87-92 provides what it calls "protection of increases in guaranteed minimum pensions ("Anti-Franking")".

And, if that weren't enough, Appendix 1, section 7 of the Barclays 1964 scheme rules explicitly rules it out. The only exceptions it cites are sections 37A and 41A-E of the 1975 act. (These are actually labeled "37(1) & 41(1-5)" in the Act itself; just to add to the confusion). These sections cover certain issues with regard to widows and widowers AND also the priority of distribution of assets in the event of Barclays going bust (i.e. GMP gets into the lifeboat first) - doesn't apply to our thinking.

2. Regarding increases to GMP, GMP is anchored in a calculation done by WTW at the time of Leaving (employment/being an Active member) - in this case in 1995 your figure was £1,339

Barclays have chosen to Revalue GMP at a fixed rate of 7% pa. At GMP date (having checked the original figure with HMRC) WTW apply the revaluation percentage to your base figure of £1,339 giving a revalued GMP figure of £9,525.99. This represents an increase of £8,186.99 in your GMP. It is this figure of £8,186.99 (the increase) which is protected (by both statute AND scheme rules) from Franking.

3. My colleague took NRD so no confirmation there unfortunately.

----

As I keep saying, we must look to statute and scheme rules to understand our legal position. Various commentaries, on the Internet , may well help us to understand the legal position BUT they are not a substitute for it.

The Ombudsman has a detailed understanding of the various statutes and, believe me, if he can understand them, he will have no problem at all with Barclays' scheme rules.

The bottom line is that he, the Ombudsman, will assess our claim SOLELY on the basis of Statute and Scheme Rules.