Barclays 1964 Pension and GMP

Annworked42years

I retired at 58 and took my Barclays pension after 26 years service. Barclays contracted all staff out of SERPS. I now find that after a confirmed 41 full years of National Insurance contributions that my state pension, due in September, is to be reduced by over £30 per week due to being contracted out while in Barclays employment.
Whilst I expected a reduction I was very surprised at the amount. On reading through the Barclays pension literature it states that GMP is payable from age 60 but should increase at state pension age, 66 for me.  

Currently my pension does include two GMP elements Pre 1988 and Post 1988.

My understanding is that the GMP element should be equal to or more than the shortfall in my state pension to ensure that any staff member was not disadvantaged due to being contracted out. If it remains as it is at present I have a shortfall over £500 per year.

On contacting the pension team to try to get confirmation that my GMP would increase at state pension age to address this shortfall, I was told my GMP will not increase in September.

Has anyone else found themselves in this situation?

Marcon

Annworked42years said:

I retired at 58 and took my Barclays pension after 26 years service. Barclays contracted all staff out of SERPS. I now find that after a confirmed 41 full years of National Insurance contributions that my state pension, due in September, is to be reduced by over £30 per week due to being contracted out while in Barclays employment.
Whilst I expected a reduction I was very surprised at the amount. On reading through the Barclays pension literature it states that GMP is payable from age 60 but should increase at state pension age, 66 for me.  

Currently my pension does include two GMP elements Pre 1988 and Post 1988.

My understanding is that the GMP element should be equal to or more than the shortfall in my state pension to ensure that any staff member was not disadvantaged due to being contracted out. If it remains as it is at present I have a shortfall over £500 per year.

On contacting the pension team to try to get confirmation that my GMP would increase at state pension age to address this shortfall, I was told my GMP will not increase in September.

Has anyone else found themselves in this situation?

GMPs are a sure fire winner for utter confusion!

In broad terms, a pension scheme was allowed to contract out of SERPS on a GMP basis if the scheme paid overall benefits at least as good as those foregone by not building up SERPS while you were actively building up benefits in the scheme. You paid lower NI as a result of being contracted out, which boosted your take home pay. The pension you will receive is well in excess of the SERPS benefits you would have built up had you not been a scheme member at all, so you have not 'lost out', although I can understand why you feel that way. 

The literature you're looking at would have been accurate at the time it was issued (i.e. when State Pension Age for women was still 60). GMP age remains at 60 even though SPA has increased (adding another layer of confusion). Increases on GMP used to be paid wholly by the state (for service prior to 1988); and for service from 1988, any increase up to 3% is paid by the scheme.  The state no longer pays any increases on pre-88 GMP, following the introduction of the 'new' state pension in 2016. Because inflation has been below 3%, no increase is payable on your post-88 GMP.

Does your state pension forecast say that you can improve your position (by paying voluntary NI as you are now retired), or that the figure quoted is the maximum you can get?

xylophone

You  were a female member of the Barclays 1964 Pension Scheme.

You took your pension two years before Scheme  Retirement Age (60) which is also female GMP age.

When you took your pension, there would have been an actuarial reduction.

When you reached age 60  did you receive a letter from the Administrators (WTW?) along these lines?

https://forums.moneysavingexpert.com/discussion/comment/78414702/#Comment_78414702

If so, presumably you have noticed that each time your Barclays Pension receives an annual increase, there is none paid on pre 88 GMP, (which  always remains the same) up to 3% CPI paid on the post 88 GMP (presumably you see this in April) and the balance by up to  5% RPI?

And  you are aware that the Barclays Scheme applies a deduction to your Scheme Pension when you reach State Pension Age?

https://forums.moneysavingexpert.com/discussion/comment/78415781/#Comment_78415781


With regard to the State Pension, on 6/4/16, two calculations were done for you.

Old Rules

NI years/ 30 (max) x £119.30  + (Additional State Pension - Deduction for Contracting Out)


New Rules

(NI years/35 (max) x £155.65) - Contracted Out Pension Equivalent.

The higher of the two was your Starting Amount for NSP.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

Do you know what your starting amount was?

And what are you set to receive in September?

Have you not worked since you retired some eight years ago?  You were not entitled to NI credits for any reason?

Annworked42years

Xylophone, thanks for your detailed reply.
i appreciate my Barclays pension would be reduced as I took it two years early and that there would be a further reduction once i received my state pension, it just feels like a double blow. Added to that at the time I didn’t expect that my state pension age would move to 66.
My Barclays pension will be reduced by £100+ per month and my state pension is £120 month less than expected. 
I have been advised that my state pension will be £148.46 per week, not sure what you mean when you say starting amount.
I have worked just one day per week for past three years but not earned enough to pay NI contributions. 
I have enquired about paying additional contributions to increase my SP that would cost approx £3,800.
Thanks again for your explanation 

xylophone

You are aware that your state pension  will be paid not monthly but four weekly?

I have been advised that my state pension will be £148.46 per week, not sure what you mean when you say starting amount.

When the New State Pension started on 6/4/16, a "starting amount"~ (in link in my previous post above described as "foundation amount") was calculated for all who were under state pension age at that date.

It seems that you already had more than 35 years NI at that point.

Therefore your "starting amount" was the higher of

£119.30 (Full Basic  SP 2016/17) + (Additional State Pension - Deduction for Contracting Out).

£155.65 (Full NSP) - Contracted Out Pension Equivalent ( termed "Rebate Derived Amount" in link}

Your "starting amount" was less than a Full New State Pension and you had a number of years before you reached State Pension Age,

Therefore you could improve your starting amount up to (but not beyond) a full new state pension by contributions or credits for years from 6/4/16.

Have a look at this

https://www.dpf.org.uk/explorer/files/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

which was produced by Royal London in 2016 (and subsequently updated).

It seems that you did not do this so that the amount you are about to receive will be your "starting amount" uprated under the "triple lock" for the years post 2016.

https://commonslibrary.parliament.uk/research-briefings/cbp-7812/

The deduction made from your Barclays Scheme Pension at SPA is not related to the calculation above.

https://www.theguardian.com/theguardian/2001/nov/10/features.jobsmoney2

kidmugsy

Marcon said:

GMPs are a sure fire winner for utter confusion!

You can say that again.  There have been a couple of times that I thought I had a glimmer of understanding but I can't remember what it was.  Apart from being intricate it's so ruddy boring.  Uuurgh. I suppose it might all be simpler once the transition to the new state pension is over, and once DB pensions have been exterminated.  But it won't be, because a new generation of politicians will just complicate it again.

Annworked42years

Thanks everyone for your comments, really appreciated, given me lots to consider. 

molerat

Your SP has not been reduced by £30 per week, you are not a full member of the new 2016 pension but a transitional member receiving no less than you had already accrued at the changeover and actually getting the best of both worlds.  Buying additional years with that £3880 is the best value for money you could get, pays the capital back in around 3 years. 

Have you been looking after grandchildren whilst the parent works ?

GSP

Interesting reading a part of Xylophone’s first post here which was “ And  you are aware that the Barclays Scheme applies a deduction to your Scheme Pension when you reach State Pension Age?”

Is this a positive of transferring out and choosing a flexi drawdown rather than db pension, the deduction in your scheme pension won’t apply, because you haven’t one?

DT2001

GSP said:

Interesting reading a part of Xylophone’s first post here which was “ And  you are aware that the Barclays Scheme applies a deduction to your Scheme Pension when you reach State Pension Age?”

Is this a positive of transferring out and choosing a flexi drawdown rather than db pension, the deduction in your scheme pension won’t apply, because you haven’t one?

I assume that any transfer value will have taken account of the SPA reduction BUT you are right that it needs to be considered when drawing up your spreadsheet to see the relative merits of moving or not.

The impact of GMP and franking of increases also needs to be taken into account. It is complex and trying to get the correct information from WTW (and Barclays Pension before that) is not always easy. Early retirement/redundancy schemes complicated matters and threw up some, I’m sure, unforeseen consequences. You definitely needed to know what questions to ask which is why I was grateful to have this found this forum to solve what happens with my Deferred 1964 Barclays pension at 65 and SPA. I had already drawn my pension with an actuarial reduction at 51 on, with hindsight, assumptions that were incorrect. I believe there is better computer generated reports now.

Of course GMP equalisation could impact.

I know uncertainty doesn’t help with planning BUT I just remind myself it was non contributory (at 18 I wouldn’t have thought about pensions!) and contracting out meant more money into SAYE. So I count myself as lucky.