Guaranteed Minimum Pension Increase

fly-catchers

I am currently receiving a pension from Royal Mail. This month I received my first index linked increase of RPI of 3.3%.
On the Capita website which administers the scheme it has this information.
The part of your pension above any Guaranteed Minimum Pension (GMP) will be increased each year by the annual increase in the rate of the Retail Prices Index over the preceding year, or 5%, whichever is lower. GMP increases are only paid once you are aged 60 (if you are a woman) and aged 65 (if you are a man). We will pay increases of up to 3% per year on GMP earned between April 1988 and April 1997.

So does that mean when I get to 65 I will get an additional increase to cover the 1988-1997? Or what exactly is the GMP part of my pension? As it is mainly final salary and the current increase was applied to the entire pension. Confused!

xylophone

https://www.royalmailsps.co.uk/im-receiving-my-pension/pension-increases

The position used to be that up to GMP age, the scheme would index link the whole of the pension up to GMP age - after that, it would pay no increases on pre 88 GMP, up to 3% on post 88 GMP and increases according to scheme rules on the balance ("excess" over GMP).

The current position in respect of your pension is set out in link above.

https://forums.moneysavingexpert.com/discussion/comment/75483907#Comment_75483907

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

xylophone

You can download the Guide below (dated October 2018)

Guide to RMSPS
pension payments
and increases
For Section C members

fly-catchers

I must admit I am still confused as to what is the GMP part of my pension! All my NRA60 pension now in payment has been increased by 3.3%. And that includes the part i earnt from 1988 to 1997. I started in 1988. I have read both the pages on the Capita website and on the RMPP when they still meantioned GMP and still none the wiser!

xylophone

I take it that you are male and still under GMP age (65).

What used to happen to men who retired at age 60 with a public service style pension that included GMP was that until they reached GMP age, the Scheme indexed the whole of the retirement pension.

At age 65, (when it was expected that the SP would commence) the scheme administrator would write to them along these lines

post 33 https://forums.moneysavingexpert.com/discussion/4532605/totally-confused-by-contracted-out-deduction-letter&highlight=gmp+revaluation%20%20&page=2

This letter would show the pension split into component parts as above.

From then on, the annual pension statement would show

pre 88 GMP - no increase

post 88 GMP (CPI up to 3%)

excess (scheme rules increase)

The pre 88 GMP and post 88 GMP beyond 3% would be increased by the appropriate increase to Additional State Pension and paid with the SP.

There was some muddying of the waters when state pension age started to be higher than GMP age.

Certain schemes (notably the public service schemes) decided that they would continue to increase the whole of the pension until the pensioner reached his/her SPA.

Then came the new state pension which completely ended the mechanism whereby the GMP increases explained above could be paid through the State Pension.

The government decided that for a certain period (originally to end 2018) people retiring from public service schemes would continue to have the whole of their scheme pension increased by the scheme for the rest of their lives.

This has now been extended to 2021.

See https://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/Employment_and_labour_law/UK_Pensions_Speedbrief_Public_service_pensions_indexing_and_equalising_GMPs_an_update

fly-catchers

Thanks. It seems even more complicated that I first thought. But have I got this right- when I get to 65 the revaluation of the pension will change. Where parts of the 1988-97 will go up by CPI to max of 3%. And the rest by RPI to max 5%. Or am I still missing something?

xylophone

The Guide says

If you reach State Pension age on or after 6 April 2016

From April 2016, the new single tier State Pension was introduced. The government is currently consulting on how to manage GMP liabilities under the new State Pension scheme.
As an interim measure, public sector pension schemes will take on paying all GMP increases until 5 April 2021.

We will be able to confirm what happens after that
once a decision has been made following the consultation. Pension above any GMP will continue to be increased by us as described above.
Please note that you will receive no GMP increases from the State if you instead receive the new State Pension payable from April 2016.
Whilst there will obviously still be a requirement to pay pension increases, we will need to await the outcome of the Government review to learn how GMP liabilities are to be dealt with and who will be responsible for these going forward.

As far as I can see, your pension increase will continue as now at least until 2021.