Pension Equalisation (Barber ruling)

Thrugelmir

Froggitt2 said:

xylophone said:

I was a member of a final salary scheme from 1985 to 1994.

Do you have your statement of deferred benefits on leaving showing

Pre 88 GMP

Post 88 GMP

Excess

What exactly does your scheme booklet say about revaluation  (GMP/Excess) in deferment?

What is Scheme NRD? When do you reach it?

Have you obtained a state pension forecast?

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

The "Estimate of deferred benefits" does not split out pre and post 88 GMP. It just shows pension at the date I left, and pension at NRD.

An estimate will include certain assumptions. If these change then the projected amount will. The amount you will receive in 2029 is not guaranteed. Inflation has fallen over the past 3 years. 

xylophone

An estimate will include certain assumptions. If these change then the projected amount will. The amount you will receive in 2029 is not guaranteed. Inflation has fallen over the past 3 years. 

The "statement of deferred benefits on leaving the scheme" is not an estimate.

It is a statement of how the pension entitlement stood at date of leaving.

The scheme booklet would normally state how benefits (GMP/excess) revalue in deferment.

zagfles

Froggitt2 said:

zagfles said:

Why do you think it's got anything to do with GMP equalisation? Nobody's benefits should be reduced as a result of this.

It definitely is....the administrators referred to Barber, and the scheme booklet in 2019 refers explicitly to GMP equalisation and checking/correcting values.
Re benefits being reduced, yes that's what I thought as well, however between the dates of my two valuations, the pension has been reduced by 20-25%.

Has the "pension at date of leaving" reduced? That's what happened in the Sainsbury's scheme to someone I know. Basically the pension at date of leaving originally included a increase to the account for the fact that part of the pension had a protected NRD of 60 so seemed to include a late retirement factor on this part to 65. They then started giving quotes with the pension at date of leaving not including this LRF.

Did your scheme ever have a NRD of 60? Or a NRD of 60 for women after 1990, in which case it would have to be equalised for men?

What is the scheme? You say it's a large employer so say who it is and others may have had similar issues or may be able to explain.

Froggitt2

zagfles said:

Froggitt2 said:

zagfles said:

Why do you think it's got anything to do with GMP equalisation? Nobody's benefits should be reduced as a result of this.

It definitely is....the administrators referred to Barber, and the scheme booklet in 2019 refers explicitly to GMP equalisation and checking/correcting values.
Re benefits being reduced, yes that's what I thought as well, however between the dates of my two valuations, the pension has been reduced by 20-25%.

Has the "pension at date of leaving" reduced? That's what happened in the Sainsbury's scheme to someone I know. Basically the pension at date of leaving originally included a increase to the account for the fact that part of the pension had a protected NRD of 60 so seemed to include a late retirement factor on this part to 65. They then started giving quotes with the pension at date of leaving not including this LRF.

Did your scheme ever have a NRD of 60? Or a NRD of 60 for women after 1990, in which case it would have to be equalised for men?

What is the scheme? You say it's a large employer so say who it is and others may have had similar issues or may be able to explain.

Yes its the Sainsburys scheme. And yes they've also reduced the "pension at date of leaving"....I hadn't spotted that.
My NRD was always, to my knowledge, 65. I don't know about women in the scheme, I'd guess 60.

Froggitt2

I've also found a letter from when I left. "Your pension also includes a GMP" which works out at about 10% of the total pension. So they are revaluing 10% of the pension for 50% of the time I was there, so that's just 5% of the pension that they are revaluing....and yet they managed to knock it by 25% or so 

zagfles

This is my understanding from a bit of investigation into this a few months ago. It seems the Sainsburys scheme used to have a NRD for women of 60, up until Sept 1992 when the changed it to 65. For men it was always 65.

Following Barber, they had to equalise post May 1990 service. So men got pension based on NRD of 60 just for the period May 1990 to Sept 1992. 

It seems the original quotes of pension at leaving included an uplift to the "age 60" service to reflect this, but they've now changed it to remove this. Online quotes on the WTW site were showing similar values for up to age 60 but less post 60, maybe they've reduced the late retirement factors.

I worked out the pension at NRD and it seemed to be correct with the new quotes not accounting for the LRF uplift, however on the WTW online quote system it was quoting a significantly higher pension at NRD. So I think the new quotes of scheme value at NRD don't include the uplift, but when you run a quote for "early retirement" on your 65th birthday (so not "early" but it works), it accounts for the uplift and might show similar to your original quote.

It's all a bit of a mess and not explained properly. I might get to the bottom of it one day... 

xylophone

My NRD was always, to my knowledge, 65. I don't know about women in the scheme, I'd guess 60.

I knew a female employee who retired from Sainsburys in the mid eighties when the NRD was definitely 60.

According to below ( information for Final Salary Section active members)

https://www.yumpu.com/en/document/read/38784129/final-salary-section-sainsburys-pensions-website

For women, any pensionable service up to 26 September 1992 has a protected retirement age of 60.

For men, this protection runs from 17 May 1990 to 26 September 1992.

Your normal pension age for the payment of these benefits is still 65 but we take this protected service into account when calculating your pension benefit.

With regard to early leavers, 

Your pension in excess of the GMP will be increased each year until your payment comes into payment as follows

Pension accrued up to 5 April 2009 increased by Retail Price Index (inflation) up to a maximum of 5% per year

Pension accrued from 6 April 2009 increased by Retail Price Index (inflation) up to a maximum of 2.5% per year.

It is silent on how the GMP increases in deferment but as this is a private scheme, it is likely that the "Fixed Rate" method is used (but the OP would have to check this with the administrators). 

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

If so, given his date of leaving the scheme, OP's GMP should be increasing at 7% per annum.

In this Guide to Retirement https://www.jspensions.co.uk/SPS-sainsburys/documents/#retirementoptionsguide

Guaranteed Minimum Pension

As a member of the Sainsbury’s Pension Scheme, you were contracted

out of the State earnings-related scheme and paid reduced-rate National

Insurance contributions. As a result, HMRC calculates a figure based on

the minimum pension payable to you at retirement which is broadly the

pension you would have received had you not been contracted out. This is

called the Guaranteed Minimum Pension (GMP). The Scheme may need to

adjust members’ GMP figures, to take account of a court ruling that says

defined benefit pension schemes must ensure equal treatment of men

and women’s benefits built up in the Scheme between17th May 1990 and

5th April 1997. We will let you know if this affects you.

Froggitt2

xylophone said:

My NRD was always, to my knowledge, 65. I don't know about women in the scheme, I'd guess 60.

For women, any pensionable service up to 26 September 1992 has a protected retirement age of 60.

For men, this protection runs from 17 May 1990 to 26 September 1992.

Your normal pension age for the payment of these benefits is still 65 but we take this protected service into account when calculating your pension benefit.

Is this (bolded) saying that everything from 85-92 carries on as before, but 92-94 (when I left), there is some deduction to just the GMP element? Which is like 10% of the total pension? ie a deduction applied to a quarter of 10%, ie they want to reduce 2.5% of my pension by an unspecified amount? Lets say they want to reduce it by 20%......thats an overall reduction of 0.5%, whereas they quote I received was an overall reduction of 20%.

Froggitt2

zagfles said:

This is my understanding from a bit of investigation into this a few months ago. It seems the Sainsburys scheme used to have a NRD for women of 60, up until Sept 1992 when the changed it to 65. For men it was always 65.

Following Barber, they had to equalise post May 1990 service. So men got pension based on NRD of 60 just for the period May 1990 to Sept 1992. 

It seems the original quotes of pension at leaving included an uplift to the "age 60" service to reflect this, but they've now changed it to remove this. Online quotes on the WTW site were showing similar values for up to age 60 but less post 60, maybe they've reduced the late retirement factors.

I worked out the pension at NRD and it seemed to be correct with the new quotes not accounting for the LRF uplift, however on the WTW online quote system it was quoting a significantly higher pension at NRD. So I think the new quotes of scheme value at NRD don't include the uplift, but when you run a quote for "early retirement" on your 65th birthday (so not "early" but it works), it accounts for the uplift and might show similar to your original quote.

It's all a bit of a mess and not explained properly. I might get to the bottom of it one day... 

I wish I could get my head around this......maybe I'll try again tomorrow when I'm not so tired!

Thrugelmir

xylophone said:

An estimate will include certain assumptions. If these change then the projected amount will. The amount you will receive in 2029 is not guaranteed. Inflation has fallen over the past 3 years. 

The "statement of deferred benefits on leaving the scheme" is not an estimate.

It is a statement of how the pension entitlement stood at date of leaving.

The scheme booklet would normally state how benefits (GMP/excess) revalue in deferment.

I'm questioning the "estimated" pension payable in 2029 not the separately notified amount as the date of leaving service. Which are two different figures.