GMP and exceeding LTA

marlot

The pension that I'm expecting to take last is a DB with a GMP entitlement. I'm going to be over the LTA when I take it.


I believe that the DB scheme would normally pay the LTA charge by reducing the annual pension. What happens if that reduction would take the pension below the GMP value?


I've been searching but can't find anything which answers this question.


Thanks!

Paul_Herring

Surely the GMP is a pre-tax figure, thus any reduction of net received because of tax (either because of the LTA or simple income tax) wouldn't matter?

xylophone

Your GMP is just that - a guaranteed minimum pension - I don't see how it could be reduced below its value.

sandsy

I guess if the scheme administrator isn't allowed to pay less than the GMP, then the tax amount due is for your own account.

Silvertabby

Is it the whole of the DB pension that takes you over the LTA, or does the GMP do that by itself?

If the former, can you reduce the pension (but not the GMP) by commutation?

marlot

Silvertabby wrote: »

Is it the whole of the DB pension that takes you over the LTA, or does the GMP do that by itself?

If the former, can you reduce the pension (but not the GMP) by commutation?

That's what I'm hoping to do - I'm just concerned about what happens if I get the sums wrong. I'm still trying to get my head around GMP rules.


Hopefully it'll just be a theoretical problem!

Dox

Have you asked the scheme administrators how they'd handle it if the situation arose?

Marcon

The requirement is for the scheme to pay the GMP at GMP age. That doesn't mean the scheme member must receive the full GMP - for example, if their state pension is in payment (and of course is paid gross) and they have a substantial GMP in payment with no excess over GMP, their whole pension income (state and private) will be taxed by deduction from the GMP.

luckyfool151

Hard to tell what they would do. I would echo what others have stated though, the GMP is guaranteed.


I am guessing though that the GMP is payable in conjunction with other final salary benefits that would be reduced first to pay any excess charge.


You really do need to ask the scheme administrator how they work this.

Marcon

luckyfool151 wrote: »

Hard to tell what they would do. I would echo what others have stated though, the GMP is guaranteed.

The GMP may be guaranteed, but it can still be paid net of tax.

luckyfool151

Marcon wrote: »

The GMP may be guaranteed, but it can still be paid net of tax.

Aren't a lot of annuity payments when you take into consideration personal tax codes?


I won't profess to know the answer but the calculation for the final salary pension and the GMP will surely be calculated on a gross basis before payments are made? The point the benefits are calculated are surely separate from when the annuity payments that are received? I won't profess to know the answer here to OPs question but I am intrigued how commutation of a normal DB pension for payment of an excess charge would work with the GMP if, as I understand it, the GMP can't be commuted to cash to reduce the GMP. It seems possible the excess charge is recovered via adjustments to the taxat ion once the payments comments. Either way, quite intrigued by the answer OP receives from the scheme.