Pension Revaluation of deferred pension

NedS

Pat38493 said:

caveman8006 said:

Do check this thread, as the point made about the importance of choosing whether to retire before or after the anniversary of your date of leaving service can make a huge difference to the resulting pension

https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

OK but are these pension revaluation orders published somewhere?

So if my scheme was deferred as of May 31 2008, I should retire after that date as the next year after that had a lower CPI than 2008?  Or are the tables mentioned above different to the historic published CPI?

Therefore if I was planning to retire Jan 2026 for example I should delay it till June 2026?

Also - if as above, the scheme is using a more generous system, does this quirk still apply?

And from what I read in the other thread, not only are the pension administrators not obliged to point this out to you if you select a silly retirement date, they actively are not allowed to tell you?

I guess this is not an issue if you retire whilst you are still a contributing member of an active scheme like public service scheme as well?

I agree this is something that is not easy to wrap your head around.

I wonder if you could request two quotes - one for retirement in January, and another for retirement in June, and make your decision based on that?

Pat38493

NedS said:

Pat38493 said:

caveman8006 said:

Do check this thread, as the point made about the importance of choosing whether to retire before or after the anniversary of your date of leaving service can make a huge difference to the resulting pension

https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

OK but are these pension revaluation orders published somewhere?

So if my scheme was deferred as of May 31 2008, I should retire after that date as the next year after that had a lower CPI than 2008?  Or are the tables mentioned above different to the historic published CPI?

Therefore if I was planning to retire Jan 2026 for example I should delay it till June 2026?

Also - if as above, the scheme is using a more generous system, does this quirk still apply?

And from what I read in the other thread, not only are the pension administrators not obliged to point this out to you if you select a silly retirement date, they actively are not allowed to tell you?

I guess this is not an issue if you retire whilst you are still a contributing member of an active scheme like public service scheme as well?

I agree this is something that is not easy to wrap your head around.

I wonder if you could request two quotes - one for retirement in January, and another for retirement in June, and make your decision based on that?

Confusing for sure but in the other thread that was linked above, it was also stated that this also depends when the tables are published because if you ask for an estimate before November you don't know what will be in the next tables, or in some cases they may still be using the prior year's table as they haven't updated their system yet or whatever.

My impression is that these tables published in November represent the legal minimum that should be done, but some schemes may have different ways to calculate it - they are just not allowed to have a worse result?

Further, shouldn't the methodology that the government uses to calculate these tables be transparent so that you should be able to estimate what the values will be in advance?

Notepad_Phil

Pat38493 said:

caveman8006 said:

Do check this thread, as the point made about the importance of choosing whether to retire before or after the anniversary of your date of leaving service can make a huge difference to the resulting pension

https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

OK but are these pension revaluation orders published somewhere?

...

Google is (usually) your friend - for me, "google section 52a orders" brings back (very near) the top the following .gov.uk link, which is what I think you're after https://www.legislation.gov.uk/uksi/2021/1308/made

Pat38493

Notepad_Phil said:

Pat38493 said:

caveman8006 said:

Do check this thread, as the point made about the importance of choosing whether to retire before or after the anniversary of your date of leaving service can make a huge difference to the resulting pension

https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1

OK but are these pension revaluation orders published somewhere?

...

Google is (usually) your friend - for me, "google section 52a orders" brings back (very near) the top the following .gov.uk link, which is what I think you're after https://www.legislation.gov.uk/uksi/2021/1308/made

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

hyubh

Pat38493 said:

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

They are effectively synonyms in a pensions administration context, i.e. 'statutory' = minimum required in statute = S52a orders = Occupational Pensions (Revaluation) Orders. Use of higher revaluation for post-09 service is then implied by 'cumulative maximum of 5% per year'.

Pat38493

hyubh said:

Pat38493 said:

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

They are effectively synonyms in a pensions administration context, i.e. 'statutory' = minimum required in statute = S52a orders = Occupational Pensions (Revaluation) Orders. Use of higher revaluation for post-09 service is then implied by 'cumulative maximum of 5% per year'.

Ok and sorry to be pedantic but just to make sure I understand - this effectively means they are not using the table on the gov.(UK) website to revalue the pension they are doing something different (higher) and this is perfectly Legal as long as the end result is not lower than the one from using those official tables?

hyubh

Pat38493 said:

hyubh said:

Pat38493 said:

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

They are effectively synonyms in a pensions administration context, i.e. 'statutory' = minimum required in statute = S52a orders = Occupational Pensions (Revaluation) Orders. Use of higher revaluation for post-09 service is then implied by 'cumulative maximum of 5% per year'.

Ok and sorry to be pedantic but just to make sure I understand - this effectively means they are not using the table on the gov.(UK) website to revalue the pension they are doing something different (higher) and this is perfectly Legal as long as the end result is not lower than the one from using those official tables?

No, 'higher revaluation' = capped to 5%, 'lower revaluation' = capped to 2.5%. This terminology is actually on the link that Notepad_Phil gave for the latest Occupational Pensions (Revaluation) Order:

Column 1 Revaluation period	Column 2     Higher revaluation percentage	Column 3    Lower revaluation percentage

Notepad_Phil

Pat38493 said:

hyubh said:

Pat38493 said:

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

They are effectively synonyms in a pensions administration context, i.e. 'statutory' = minimum required in statute = S52a orders = Occupational Pensions (Revaluation) Orders. Use of higher revaluation for post-09 service is then implied by 'cumulative maximum of 5% per year'.

Ok and sorry to be pedantic but just to make sure I understand - this effectively means they are not using the table on the gov.(UK) website to revalue the pension they are doing something different (higher) and this is perfectly Legal as long as the end result is not lower than the one from using those official tables?

If I understand your posts correctly, then no, that's not correct. Your non-GMP revaluations that are CPI  to a max of 5% will be using the table, they are the ' higher revaluation percentage' column of the table.

Pat38493

Notepad_Phil said:

Pat38493 said:

hyubh said:

Pat38493 said:

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

They are effectively synonyms in a pensions administration context, i.e. 'statutory' = minimum required in statute = S52a orders = Occupational Pensions (Revaluation) Orders. Use of higher revaluation for post-09 service is then implied by 'cumulative maximum of 5% per year'.

Ok and sorry to be pedantic but just to make sure I understand - this effectively means they are not using the table on the gov.(UK) website to revalue the pension they are doing something different (higher) and this is perfectly Legal as long as the end result is not lower than the one from using those official tables?

If I understand your posts correctly, then no, that's not correct. Your non-GMP revaluations that are CPI  to a max of 5% will be using the table, they are the ' higher revaluation percentage' column of the table.

Oh right ok so it's actually very simple - I can calculate exactly what my pension will be - if my pension was deferred in May 2008, and I was retiring in June this year, I would add 33.8% to the result to get my pension?  Just that very simple sum?

The numbers between higher and lower are identical except in the last year - is that normal or just by chance?

Is that correct or do you have to split the pension into years and use each revaluation percentage on each individual year?  

I guess it must be the latter otherwise it would not make sense that there are no "lower" numbers pre 2009?  So in that case do you have to take 33.8 - 27.4 = 6.4% and apply that, then apply 29.2-27.4 and so on?

The other question this leaves open - if you have a pension that is split into several "tranches" which ended on several dates, is the revaluation done for each tranche independently according to the end date of that tranche, or are all tranches using the final deferment date?

Notepad_Phil

Pat38493 said:

Notepad_Phil said:

Pat38493 said:

hyubh said:

Pat38493 said:

Also just to point out, in a recent document from my DB scheme dated November last year, it says that all the tranches of my pension are revalued prior to retirement according to "Statutory non GMP increases prior to retirment see note 2"

Note 2 says - Statutory non-GMP increases prior to retirement are based on RPI for periods of deferment up to 2010, and CPI for periods of deferement after that, subject to a cumulative maximum of 5% per year".

It doesn't mention anything about using the occupational pensions revaluation order, but it does use the word "statutory", which is a bit confusing.

They are effectively synonyms in a pensions administration context, i.e. 'statutory' = minimum required in statute = S52a orders = Occupational Pensions (Revaluation) Orders. Use of higher revaluation for post-09 service is then implied by 'cumulative maximum of 5% per year'.

Ok and sorry to be pedantic but just to make sure I understand - this effectively means they are not using the table on the gov.(UK) website to revalue the pension they are doing something different (higher) and this is perfectly Legal as long as the end result is not lower than the one from using those official tables?

If I understand your posts correctly, then no, that's not correct. Your non-GMP revaluations that are CPI  to a max of 5% will be using the table, they are the ' higher revaluation percentage' column of the table.

Oh right ok so it's actually very simple - I can calculate exactly what my pension will be - if my pension was deferred in May 2008, and I was retiring in June this year, I would add 33.8% to the result to get my pension?  Just that very simple sum? Assuming that June 2022 is the actual month and year that you reach scheme retirement age, then yes, that is correct. It would not be true if June 2022 was just the date you decided you wanted to start early retirement. (Edit: Altough unlikely, there may also be scheme rules that might mean you get more than this - you'd need to check with the scheme to check.)

The numbers between higher and lower are identical except in the last year - is that normal or just by chance? Just by chance, they would look very different if inflation had been 1970's type figures.

Is that correct or do you have to split the pension into years and use each revaluation percentage on each individual year?  You just need to take the relevant 33.8% figure and use that - with the proviso above about scheme retirement age.

I guess it must be the latter otherwise it would not make sense that there are no "lower" numbers pre 2009?  So in that case do you have to take 33.8 - 27.4 = 6.4% and apply that, then apply 29.2-27.4 and so on? No. There are no "lower" numbers pre 2009 as the change in cap to 2.5% only came in from 2010. If a pension was deferred pre-2010 then its cap will remain at 5%.

The other question this leaves open - if you have a pension that is split into several "tranches" which ended on several dates, is the revaluation done for each tranche independently according to the end date of that tranche, or are all tranches using the final deferment date? If I undertand you correctly, then using just the final deferment date for all would mean your previous tranches losing their inflationary protection. That doesn't happen.

See answers above - if this is very important to you then please double check this information with your pension administrator.