GMP removed from pension

Sue_S

Just had some really disappointing news. I had a small pension from a long ago employment which I could have taken when I was 60. This was quoted as including an annual GMP amount.

Anyway, as I was still working I decided to defer the pension and was informed that it would increment at 8% per annum.

This year (aged 63) I decided to take the pension. The quote I received was minus the GMP amount. I contacted the pension company and have been told that upon contacting HMRC the pension company was told that no GMP was due to me! A bit of a shock as you can imagine!

Does this often happen? It must affect people's retirement planning if you're told one figure which you assume is set in stone and then are given another one when you actually ask for the money.

Apparently if I'd taken the pension at age 60 and erroneously received the GMP then it would have been deducted from my state pension when I receive it at 66!

xylophone

Apparently if I'd taken the pension at age 60 and erroneously received the GMP then it would have been deducted from my state pension when I receive it at 66!

There is definitely some confusion here.

Just had some really disappointing news. I had a small pension from a long ago employment which I could have taken when I was 60. This was quoted as including an annual GMP amount.

First of all, when were you working for this company?

You can confirm that you were a member of a contracted out salary related pension scheme?

Do you have a copy of the scheme booklet?

Do you have a statement of deferred benefits from when you left the scheme?

If so, what exactly does it say?

I take it that you are female?

https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

I don't understand the 8% figure - see above.

The GMP revaluation would only continue until GMP age (60) for a female but there would be late retirement increments on GMP not in payment- (1/7th of 1% of GMP for each complete week that retirement is deferred).

Some companies also pay late retirement increases on the pension when it is is delayed beyond scheme pension age.

See also https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

Regrettably the information received from HMRC may not be accurate.

Have you obtained a new state pension forecast?


https://www.gov.uk/check-state-pension

Sue_S

xylophone wrote: »

There is definitely some confusion here.



First of all, when were you working for this company?
02/08/1982 to 11/08/1984

You can confirm that you were a member of a contracted out salary related pension scheme?
My first instinct was to say yes but in truth I have no idea. I hadn't even been aware I was due a pension until I was contacted by Xafinity

Do you have a copy of the scheme booklet?
No

Do you have a statement of deferred benefits from when you left the scheme?
No

If so, what exactly does it say?

I take it that you are female?
Yes

https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

I don't understand the 8% figure - see above.
It's just what I was told over the phone when I discussed not taking the pension at age 60

The GMP revaluation would only continue until GMP age (60) for a female but there would be late retirement increments on GMP not in payment- (1/7th of 1% of GMP for each complete week that retirement is deferred).

Some companies also pay late retirement increases on the pension when it is is delayed beyond scheme pension age.

See also https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

Regrettably the information received from HMRC may not be accurate.

Have you obtained a new state pension forecast?

Yes, it says I've got 44 years of full contributions. There is no mention of COPE

https://www.gov.uk/check-state-pension

Thanks very much for your interest.

xylophone

GMP is part of a pension but can be separately identified.



A statement of deferred benefits on leaving would normally show

pre 88 GMP

Post 88 GMP (where applicable)

Excess.

Where "Fixed Rate" revaluation applied, the rate for the period you mention would be 8.5% - see link.

It seems that although you were with the employer for only two years, you did manage to qualify for a deferred pension otherwise there would be nothing for the administrator to pay you.

If you were contracted out during that period, one would certainly expect a GMP.

It is possible that your scheme was contracted in which would explain why there is said to be no GMP.


You have said that your state pension forecast does not give any indication of a Contracted Out Pension Equivalent.

https://www.gov.uk/government/publications/state-pension-fact-sheets/contracting-out-and-why-we-may-have-included-a-contracted-out-pension-equivalent-cope-amount-when-you-used-the-online-service

Check again with Xafinity.

https://www.moneysavingexpert.com/news/2019/06/warning-to-double-check-state-pension-forecasts/

What does your State Pension Forecast say about your entitlement?

Dox

Did you by any chance pay reduced national insurance - the so-called 'small stamp' which some married women chose to pay?

hyubh

Sue_S wrote: »

I contacted the pension company and have been told that upon contacting HMRC the pension company was told that no GMP was due to me!

Most contracted-out schemes in recent years have undertaken GMP reconciliation exercises in which they have compared their contracted-out records to HMRC's - reason being, the traditional admin practice of waiting until someone retires before checking GMP details (and challenging HMRC as applicable) is ending because HMRC is effectively 'shutting up shop', due to the abolition of contracting out full stop.

Now, there are multiple issues in GMP reconciliation, and a big one is the fact that historic data can be pretty poor, both on the scheme and HMRC sides. However, the nature of the beast is that there is only so far that HMRC's data could be challenged (the scale of the process from their side has been massive). Particularly in the case of discrepancies involving short periods of service, there has therefore been a tendency to reconcile accepting HMRC's position - in your case, of no GMP liability.

Nevertheless, the flip side is, if you have hard evidence of having been contracted-out, and ideally no reason to have been put back into SERPS too (see below), then the scheme administrator will probably have little to defend a seriously-put challenge from you with. This will be for the same reason the administrator likely reconciled accepting HMRC in the first place (i.e. lack of good historic data to argue either way).

Sue_S wrote: »

when were you working for this company?
02/08/1982 to 11/08/1984

Back then, the maximum length of service a final salary scheme could legally not grant a deferred benefit for was 5 years. So, the fact you have a preserved pension at all is an above-statutory entitlement. However, the relevance is less that in itself, then the fact the scheme could have paid a 'CEP' to put you back into SERPS for the period concerned, cancelling the GMP. Normally paying a CEP corresponds to having a full refund of contributions, and therefore not having a preserved pension, however the GMP reconciliation process may have upset that.

In fact, it may even have been more basic than that - on receiving their data from HMRC, you may have not been on it, so the scheme raised a 'was in scheme' query and HMRC replied saying as little as 'no record found', or words to that effect, and without anything to go on, the scheme administrator reconciled to accept the HMRC position.

Alternatively, as Dox says, if you had chosen to pay the married women's reduced rate of NI, then one effect would have been not accruing a GMP, i.e. any claim you did in previous statements was only ever incorrect.

xylophone

Did you by any chance pay reduced national insurance - the so-called 'small stamp' which some married women chose to pay?

OP says that she has obtained a state pension forecast

Yes, it says I've got 44 years of full contributions. There is no mention of COPE

Brynsam

xylophone wrote: »

OP says that she has obtained a state pension forecast

You have more faith in state record keeping than many!

xylophone

You have more faith in state record keeping than many!

Hm.... see comment in first post above and link in second.....

but 44 years of full contributions seems clear enough:)

Sue_S

I emailed the scheme administrators and received the following response:

A CEP is usually only paid back to SERPS when the member has not completed the statutory length of service to secure a benefit in the scheme, in which case a refund of contributions is paid back to the member.

This isn’t the case for yourself as you have a deferred benefit in the scheme. It could be that you paid a different rate of national insurance, ‘A’’ rate for example which would mean that you remained in SERPS whilst a member of the scheme. Our records will not confirm this.

We update our records based on the data that HMRC provide to us, therefore if you have any further queries you may want to contact HMRC for clarification.

I therefore contacted HMRC who have finally responded saying:

"I have checked our records and can confirm that a CEP has been paid for the period 02/08/82 to 10/08/84 from the scheme. This means there is no GMP liability for this period"

I know that I always paid a full stamp not a 'small stamp'. The statements from the administrators and HMRC seem to be contradictory. I suppose my question is whether or not it's worth pursuing this or is HMRC's information the final word. Opinions would be appreciated...

zagfles

When you left this job, did you get a refund of pension contributions? It could be the scheme have screwed up and refunded you, paid the CEP but not closed down your pension, ie you might not really be entitled to any pension at all!