Does GMP compound in deferment - NEW UPDATE

Troytempest

I am just in the throws of taking my occupational pension - 1 year early at age 64. The administrators have provided me with figures for both the DB and DC parts of the plan. Both sections of the plan include an element of GMP.

My initial question is - does the GMP compound. In my leaving statement I was given a GMP figure of £1196 per annum which would increase by 7% per annum. I left the scheme in October 1996. Assuming it does compound I reckon an annual figure of about £6900.

The figure I have been provided with looks way short of that.

Thank you.

Sandtree

https://www.gov.uk/guidance/how-to-calculate-your-scheme-members-guaranteed-minimum-pension 

GMP is compound interest

Linton

What number have you been given?

biscan25

Yes, it does. It revalues in complete tax years so =1196* (1.07)^25 £6,491 assuming your GMP age is between 6 April 2022 to 5 April 2023. If 26 complete tax years then your answer is correct.

They haven't quoted somewhere around £2,773 by any chance have they? (Based on Section 148 orders, another way of revaluing GMP.)

Troytempest

At date of leaving - £1196 GMP and £3480 non GMP which increases with CPI up to 5%.

I was expecting about £13.5k per annum.

Troytempest

Thanks biscan25 - they don't give a calculation but that would explain it.

biscan25

Have they quoted the GMP/ excess elements at retirement?

Troytempest

biscan25 said:

Have they quoted the GMP/ excess elements at retirement?

See above if that is what you mean!

Linton

But what have they said about the final figure as of the day you take your pension? Have they actually given one?

Troytempest

They have given a figure of £10.8k from June 2022 which is 1 year short of normal retirement date - retire at 64 rather than 65.

Linton

Troytempest said:

biscan25 said:

Have they quoted the GMP/ excess elements at retirement?

See above if that is what you mean!

The figure you have been given appears to be the situation when you left the scheme.  The scheme administrators need to do a calculation to work out the value after GMP has been taken into consideration.