GMP and deferred pension

MikeFloutier

Tony, would you mind letting us know the amount of your total pension in payment, in terms of £ per annum, as at your early retirement date - by which I mean when you started drawing it in 2011.

I think we may be able to construct an ERD version of the "booklet" pension details referred to in post 136 of the big thread.

I have pretty much got it all filled in but that particular figure will reduce the required assumptions to a meaningful level - I hope.

I don't believe there can be any justification for franking any GMP - any more than for NRD drawings. Unless anyone knows different.

I'm guessing that the $64,000 question is, "will I get a step-up at GMP date?"

I would have thought you will, since they wouldn't want to pay you a pension that they may be unable to claw back later if their figures turned out wrong. But we need to know that pension figure for 2011 to be able to make a good estimate.

MikeFloutier

DT2001 wrote: »

If my existing pension (£7559) is below that figure which is likely if inflation stays low will I get an increase to £9.5k?

Ok, I just noticed this in your original post Tony. Are you saying that your annual pension from Barclays, following the October 2017 increase, was £7559?

That sounded a bit low at first, I expected it to be higher after factoring in your estimated revalued GMP to GMP date. However, considering your actuarial reduction figure of 0.653 for taking it 9 years early it does sound about right.

I can roughly work back to your starting pension, in 2011, using the increases I know about (i.e. 2014-17) plus assuming 2.5% for 2011-13 BUT it would be great to have the exact figure.

MikeFloutier

Ok, my take on DT2001's Early Retirement Date (as opposed to NRD) pension - including estimated step-up at GMP date, is at - https://drive.google.com/open?id=1SNnfOnwV2qhS40LM7WLVL-KDYlJubGOH .

I've reduced assumptions are far as I could by using actuals, where known. Since his lump sum was only 0.5%, and for simplicity, I've ignored this.

I think the figures, and explanations are fairly satisfactory (with a little thought and a calculator). However I'm conscious that Proverbs 18:17 often prevails

For comparison (and this is obvious fraught..) I was offered (in 2014, my NRD) a choice of NRD basis £11,025 or ERD basis (3 days earlier) £14,209.

This represents a GMP related step-up of 28% compared with DT2001's (in 2011), which was 21.5%. Obviously his was going to be in payment (ignoring other factors) 9 years longer than mine (i.e.. before GMP date) which presumably explains the lower figure.

Anyway, have a look at it and let me know what you think. Please query any figures; I have had to spot loads of inaccuracies and mis-understandings already so I'm sure there are more.

Also, if there's any way of reproducing the file or it's contents directly (and legibly) in a post I'd be glad to know as it would be helpful.

xylophone

See post 17 where I asked

By law your pension at GMP age must be at least equal to your GMP - what calculation will be done at age 65? Is it as shown in post 165 MF thread or is it different because you took early retirement and a "step up" was applied at early retirement?

DT still does not seem to have been able to get an answer to this question from WTW.

This is post 165

https://forums.moneysavingexpert.com/discussion/4736856/barclays-final-salary-pension-gmp-excess-revaluation-anti-franking&highlight=mikefloutier&page=9

See also post 19, 21, 28, 29 re the "step up" at ERD.

See also post 15 where WTW say

3. In respect of your benefits, I can confirm that anti franking legislation does not apply.

4. I can confirm that at 65, your Guaranteed Minimum Pension will be revalued and if this value is greater than the assumed increases that have been applied, you will be entitled to a "step up" which has been detailed in our email on 6 July 2018.

You will note that the step up illustration provided by WTW in post 16 is for retirement at NRA.

MikeFloutier

Having read Post 29 (on this thread), it seems to give complete details of the method of calculation of the "Early Retirement Date" pension, in so far as it relates to the amount brought into payment at ERD - i.e. 2011.

I'm assuming the source of the info in Post 29 is WTW; is that true?

The only direct statement bearing on the calculation at GMP date, i.e. 2025, is this other quote, quoted in the previous post, presumably from WTW, which says:

4. I can confirm that at 65, your Guaranteed Minimum Pension will be revalued and if this value is greater than the assumed increases that have been applied, you will be entitled to a "step up" which has been detailed in our email on 6 July 2018.

WTW's replies to queries, contained in Post 8, include the following, more detailed description, of their calculations regarding the GMP date step-up .

...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 [presumably means then] a step-up will be given at your retirement date.

I have read this a number of times and have been finally surprised by the extent to which I'm expecting a certain meaning to be able to be ascribed to the text. In other words, I've been reading what I expected rather than what was there.

Finally, it becomes clear that their calculations are as follows:

1. At actual retirement date (2011) a figure (doesn't really matter what it is) is added to the total pension (as at 2011). It's then reduced by the Actuarial Reduction factor for drawing 9 years early (0.653).

The reason for picking the figure for the increase is presumably so that the pension, in payment from 2011, is of a reasonable size to live on but not so big that a step-down or clawback would be required at GMP date. I don't know that, but it makes sense.

2. At GMP date (2025), GMP is revalued and the increase is franked to the extent of the increase of the pension in payment from Date of Drawing (2011) to GMP date (2025).

This seems to be exactly the same as the NRD calculation, with the exception that the pension is drawn earlier.


My modified (for ERD) scheme booklet page 10 schedule seems to come up with the same result; albeit by a slightly different route but I will test this against this above-mentioned calculation description.

MikeFloutier

In post 85 there's mention, in the final quote, of an email dated 6 July 2018. Is this email where the WTW replies in post 8 come from OR is it other info (which may be of interest.

xylophone

of an email dated 6 July 2018.

I am not quite sure of what information was provided in this e-mail.

I am still puzzled as to why a "step up" is given at ERD.....

Dt may come back with more information.

MikeFloutier

I can see that in my calculations I have referred to "GMP related step-up" whereas WTW mention that the ERD step-up is calculated by estimating (2.5% seems to be the figure) the increases to the Excess or Non-GMP portion of the pension from ERD to NRD (i.e. 2011 to 2020). This may be a misnomer but the underlying principle I believe is sound.

In order to be more precise Tony, we will need to know exactly the amount of your total pension as at your ERD in 2011 - it would be helpful to know the exact date also to enable the Barclays October increases to be factored in correctly.

MikeFloutier

xylophone wrote: »

I am not quite sure of what information was provided in this e-mail.

I am still puzzled as to why a "step up" is given at ERD.....

Dt may come back with more information.

As I mentioned, I believe the step up at ERD is given (in anticipation of the GMP date step-up due to GMP revaluation) in order that the Actuarially Reduced Pension is not too small.

In this case, without it, it would have been around £5,500. There would then have been a step-up, at GMP date, of around £8,500 which would obviously be silly.

Basically it's a fairly arbitrary figure selected for the purposes of smoothing the pension increase AND also to provide a higher amount of pension, in payment, between ERD and GMP date to assist the pensioner in budgeting.

They have to be fairly conservative however because the ERD step-up is based (as they say) on assumed 2.5% increases between 2011 and 2020 and the relevant index trigger may be much higher than this.

MikeFloutier

In summary, having read everything I can get my hands on I believe that Barclays/WTW understand their legal obligation to restrict franking to the areas we have discussed AND that they are willing to apply these obligations to both NRD and ERD pensions at GMP dates.

It's up to us to enforce all this with the assistance TPAS and the Ombudsman if necessary.

Both my friend and I have persuaded WTW to endorse our versions of "their booklet, page 10". My friend was rewarded with a pension, in payment now for over two years, accurate to within 30p of his estimate btw.

Tony, I will find out around Christmas but you have to wait until 2025 so don't give up, get it in writing. I think with your total pension figure, at ERD, you can construct your own "page 10" to put to them for endorsement, as my friend and I have done.