LGPS pension and GMP

Notepad_Phil

Hello all, I have some questions regarding Mrs Notepad's GMP as she will be in the fortunate position of being in receipt of a smallish LGPS pension from the latter part of next year when she reaches 60 - leaving her school position in the 90s means she is able to retire at 60 without any deductions, this has been confirmed by the pension scheme.

1) As we're not sure of how much pre-88 and post-88 GMP her pension contains we wondered whether there are any calculations that we could do to estimate them? Mrs Notepad has contacted the pension scheme for the exact amounts, but with Corona it could be a while before they come back.

We'd like to know as there's no news on whether the LGPS will continue to provide the full increases to her pension including the GMP amounts after April 5th of next year. If they don't then my understanding is that unless some other protection comes in then her pre-88 GMP will receive zero inflation protection and her post-88 GMP will only receive the max of a 3% inflation protection, so this could theoretically have a big impact.

2) When do the GMP increases start from? I had initially thought that for a woman it would be from age 60, but various LGPS websites state things like "From your State Pension Age (SPA) payment of the increases to your pension may be shared between your pension fund and the Government." and "It only affects the way we calculate increases to your pension, and only from the time you reach state pension age.".

So will it really be age 67 or will it be 60 for Mrs Notepad? And if it is age 67 then will her pension be uprated in full by the LGPS until she hits 67.

3) Does anyone know how her GMP values will have been uprated since she left the pension scheme - I believe a lot of public sector schemes will have used something like average salary increases rather than fixed percentage values, but is that true of the LGPS?

Many thanks for any assistance.

molerat

The latest consultation suggests kicking the can down the road until at least 2024. https://www.gov.uk/government/consultations/public-service-pensions-guaranteed-minimum-pension-indexation-consultation

hyubh

Notepad_Phil said:

Hello all, I have some questions regarding Mrs Notepad's GMP as she will be in the fortunate position of being in receipt of a smallish LGPS pension from the latter part of next year when she reaches 60 - leaving her school position in the 90s means she is able to retire at 60 without any deductions

See here for the exact terms of the 85 year rule: https://www.lgpsmember.org/more/eightyfive.php

1) As we're not sure of how much pre-88 and post-88 GMP her pension contains we wondered whether there are any calculations that we could do to estimate them?

You would need details of her contracted-out contributions and earnings for this.

We'd like to know as there's no news on whether the LGPS will continue to provide the full increases to her pension including the GMP amounts after April 5th of next year.

If she'll only be 60, it would be full increases anyway (see below).

If they don't then my understanding is that unless some other protection comes in then her pre-88 GMP will receive zero inflation protection and her post-88 GMP will only receive the max of a 3% inflation protection, so this could theoretically have a big impact.

Alas for the poor private sector taxpayer, GMP in public sector schemes doesn't work like that.

2) When do the GMP increases start from? I had initially thought that for a woman it would be from age 60, but various LGPS websites state things like "From your State Pension Age (SPA) payment of the increases to your pension may be shared between your pension fund and the Government." and "It only affects the way we calculate increases to your pension, and only from the time you reach state pension age.". So will it really be age 67 or will it be 60 for Mrs Notepad? And if it is age 67 then will her pension be uprated in full by the LGPS until she hits 67.

Since the beginning of GMP accrual in 1978, the rule for public sector schemes was, if the net 'full' increase on any GMP wasn't being paid through the state pension for whatever reason, then the occupational scheme pays it. Originally the reasons were limited, but women's SPA diverging from their GMP payment age (GPA) increased the range of people affected. The old rule never changed however, which leads to the (informal) conclusion that GMP increases only kick in from SPA not GPA. (The system worked partly because public sector excess increases = increases on SERPS in payment = the uncapped version of the statutory post-88 GMP increase.)

3) Does anyone know how her GMP values will have been uprated since she left the pension scheme - I believe a lot of public sector schemes will have used something like average salary increases rather than fixed percentage values, but is that true of the LGPS?

All public sector schemes use so-called 'full' or 'section 148' revaluation for GMP, yes. 

Silvertabby

In this case, the deferred membership will also count towards R85 so it is likely that OP's wife will receive unreduced benefits from age 60.
 

Notepad_Phil

Many thanks for all your answers.

The pdf on molerat's consultation link would appear to rule out the possibility of Mrs Notepad losing out on her GMP which was the reason for my questions, it's more that the government is figuring out the easiest way to get the index linking in at the lowest effort for the schemes/administrators that would need to implement it.

Silvertabby

In the case of UK public sector pensions paid to pensioner members living in Australia etc (ie, where the UK State pension isn't index linked) the whole of the public sector pension, regardless of GMP,  is index linked.  In these cases, it's a simple enough matter to change the pension in payment from £ X GMP plus £X pension to just £XX pension.

I have a GMP from 1978 to 1997 with my RAF pension, so I am also keeping my eye on this !

pscotty

The consultation is concluded:-

Detail of outcome

The government is very grateful for the 31 responses it received from private individuals, pension advisers, public service pension schemes / scheme administrators, local government bodies / pension funds, trade unions and other representative organisations and private sector organisations.

Having considered the responses, the government has decided to discount conversion as a long-term policy solution and make full GMP indexation the permanent solution for public service pension schemes. This approach will mean that public service pension schemes will be directed to provide full indexation to those public servants with a GMP reaching State Pension age beyond 5 April 2021.

(Sorry - not allowed to post link to the "Consultation outcome -Public Service Pensions: Guaranteed Minimum Pension Indexation consultation")

hyubh

pscotty said:

(Sorry - not allowed to post link to the "Consultation outcome -Public Service Pensions: Guaranteed Minimum Pension Indexation consultation")

https://www.gov.uk/government/consultations/public-service-pensions-guaranteed-minimum-pension-indexation-consultation

molerat

............ or in other words too difficult. Did anyone expect anything different ? 

Silvertabby

molerat said:

............ or in other words too difficult. Did anyone expect anything different ? 

No, I didn't.  Expect they will have also taken into account the time and manpower costs involved in the (largely manual) re-calculation of benefits at SPA.