Pension Revaluation of deferred pension

Pat38493

Notepad_Phil said:

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.

I am not really planning to retire in June 2022 - this was an example to try to understand the table.

To me this doesn't make sense though - if pensions revaluations on the "higher" update were capped at 5% and "lower" update were capped at 2.5% from 2009, if a pension was deferred in 2008 or prior, the value that you have to use should be different than 33.8% depending on whether your scheme used the higher or lower approach.  However in those tables there is only one number available.  This means that if inflation had been 20% in 2015 for example, my pension should have grown 2.5% in that year on lower, or 5% on higher.  Therefore how can there only be one number to use?

To put another way, if there is a higher and lower rate capped 5% or 2.5% and my scheme is using the 5% - how can it be that a pension deferred in 2008 would have the exact same revaluation in the table, even though CPI was above 2.5% but below 5% on several occasions after 2009?

Just to be double clear here - my scheme data says that the revaluation remains always capped at 5% regardless of the year (at least that's what I understand it to mean).


For the tranches - to be clear as an example, one of the parts of my pension is labelled as "Pre 6th April 1997 Excess" - as such, I would expect that this part of the pension of £4431.65, should be revalued from 1997 and not from 2008, which was the date that the overall pension scheme was deferred?

Notepad_Phil

Pat38493 said:

Notepad_Phil said:

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.

I am not really planning to retire in June 2022 - this was an example to try to understand the table.

To me this doesn't make sense though - if pensions revaluations on the "higher" update were capped at 5% and "lower" update were capped at 2.5% from 2009, if a pension was deferred in 2008 or prior, the value that you have to use should be different than 33.8% depending on whether your scheme used the higher or lower approach.  However in those tables there is only one number available.  This means that if inflation had been 20% in 2015 for example, my pension should have grown 2.5% in that year on lower, or 5% on higher.  Therefore how can there only be one number to use? If your pension was deferred in 2008 then the only revaluation available to the company is the 5% one. They could not then just decide to change it as you had already left their employ when the 2.5% changes came in. It would only be people who were still an active member in the pension after April 6 2009 that could have the revaluation change made to them for any further accrued years from 2009.

To put another way, if there is a higher and lower rate capped 5% or 2.5% and my scheme is using the 5% - how can it be that a pension deferred in 2008 would have the exact same revaluation in the table, even though CPI was above 2.5% but below 5% on several occasions after 2009? As above, a pension deferred in 2008 could not have a 2.5% capped revaluation, it had to be a minimum of 5%.

Just to be double clear here - my scheme data says that the revaluation remains always capped at 5% regardless of the year (at least that's what I understand it to mean).


For the tranches - to be clear as an example, one of the parts of my pension is labelled as "Pre 6th April 1997 Excess" - as such, I would expect that this part of the pension of £4431.65, should be revalued from 1997 and not from 2008, which was the date that the overall pension scheme was deferred? Ah I forgot you had a continuous service rather than leaving and then being reemployed. In that case it would depend on how the scheme administrator accounts for this - they may well have already revalued that part of your pension to the 2008 date that you left, rather than showing what it was worth 11 years earlier. It would make complete sense to me for them to do this, but it's your pension admin people who would definitely know. 

Hope the above helps.

Are you just trying to calculate what you revalued pension would be worth in todays money or is there some deeper motive involved e.g. you think they've made some error in some calculation somewhere? 

Pat38493

Notepad_Phil said:

Pat38493 said:

Notepad_Phil said:

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.

I am not really planning to retire in June 2022 - this was an example to try to understand the table.

To me this doesn't make sense though - if pensions revaluations on the "higher" update were capped at 5% and "lower" update were capped at 2.5% from 2009, if a pension was deferred in 2008 or prior, the value that you have to use should be different than 33.8% depending on whether your scheme used the higher or lower approach.  However in those tables there is only one number available.  This means that if inflation had been 20% in 2015 for example, my pension should have grown 2.5% in that year on lower, or 5% on higher.  Therefore how can there only be one number to use? If your pension was deferred in 2008 then the only revaluation available to the company is the 5% one. They could not then just decide to change it as you had already left their employ when the 2.5% changes came in. It would only be people who were still an active member in the pension after April 6 2009 that could have the revaluation change made to them for any further accrued years from 2009.

To put another way, if there is a higher and lower rate capped 5% or 2.5% and my scheme is using the 5% - how can it be that a pension deferred in 2008 would have the exact same revaluation in the table, even though CPI was above 2.5% but below 5% on several occasions after 2009? As above, a pension deferred in 2008 could not have a 2.5% capped revaluation, it had to be a minimum of 5%.

Just to be double clear here - my scheme data says that the revaluation remains always capped at 5% regardless of the year (at least that's what I understand it to mean).


For the tranches - to be clear as an example, one of the parts of my pension is labelled as "Pre 6th April 1997 Excess" - as such, I would expect that this part of the pension of £4431.65, should be revalued from 1997 and not from 2008, which was the date that the overall pension scheme was deferred? Ah I forgot you had a continuous service rather than leaving and then being reemployed. In that case it would depend on how the scheme administrator accounts for this - they may well have already revalued that part of your pension to the 2008 date that you left, rather than showing what it was worth 11 years earlier. It would make complete sense to me for them to do this, but it's your pension admin people who would definitely know. 

Hope the above helps.

Are you just trying to calculate what you revalued pension would be worth in todays money or is there some deeper motive involved e.g. you think they've made some error in some calculation somewhere? 

Oh I see - so basically if I already left the schem in 2008, they are not allowed to revalue the amounts after 2009 with a 2.5% cap - they have to follow the table for the higher amounts.  I guess this is what I was just not "getting".  

 To be honest I am just trying to understand how it works in detail so that I can at least sense check the figures that are coming out, after reading a few threads where people were questioning estimates they were given.

I started out looking in to this because of another thread where there was the discussion about whether the valuation of early retirement numbers should be based on going forward to the NRA, then applying ERF, or going forward to the ERA, then apply ERF.  

My scheme claims the former whereas I was told that the latter is more normal.  However, my scheme seems to have very high deductions for early retirement, much more than the 4% / year  discussed in the other thread so I guess it probably is controlled using the ERF.

I was getting early and final retirement estimates for my DB scheme that looked too high to me based on what I was reading there and I was just trying to figure out why.  In the end I think it's more because about a third of my pension is in a tranche that's listed as - retirement age 60.

I was also wondering when I do retire, how do I validate that the pension admins have correctly calculated my retirement amount, given the huge sums involved over the rest of the lifetime.  If I actually end up taking the pension at NRA, according to your points above, actually it's very simple to do that and is a 5 minute job (assuming the deferred pension amounts were correctly calculated in the first place ) 

Anyway - this also means that any estimates I request for future retirement, they can only use that government table for time that has already passed - they then use 2.5% for the rest according to the fact sheet.

For the tranch thing I guess I have to ask them, but when they removed the GMP from the pension, my Deferred pension total number hardly changed, so if the amount up to 1997 had already been revalued in the deferred number, it must have been done in 2008 - I would have to ask them I guess.