Does GMP compound in deferment - NEW UPDATE

xylophone

I am just in the throws of taking my occupational pension 

Throes?  

In my leaving statement I was given a GMP figure of £1196 per annum which would increase by 7% per annum. 

Was this an assumption on your part that the Scheme would use Fixed Rate (not Full Rate) rather than specific information from the administrator?

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

Any GMP element of a preserved pension must also be revalued, but the method is different to revaluing excess benefits.  Currently, trustees have the choice of two different methods of revaluing GMPs: Full Rate increases or Fixed Rate increases.  Schemes which opt for increases at Full Rate increase their GMPs annually in line with Section 148 Orders (previously known as Section 21 Orders). Section 148 Orders are based on the increase in the National Average Earnings Index each year.

Fixed Rate revaluation increases are determined by the date of termination of pensionable service.

You are about to take your pension a year (?) earlier than NRD and (assuming you are male) a year earlier than GMP age.

With regard to the pension you have been quoted, are you sure that it includes your revalued GMP?

In  one scheme previously discussed on the forum,  if a deferred pension is taken before GMP age, it includes the GMP at date of leaving the scheme rather than revalued GMP up to the date of drawing the pension.

There is then an adjustment at GMP age.

Have you checked your scheme booklet for how your pension increases in payment after GMP age?

In a private scheme you would expect that post age 65, your pre 88 and post 88 GMP would be calculated and shown separately on your pension increase letter.

The pre 88 would receive no increase, the post 88 would increase up to 3% CPI  while the excess would increase by whatever index your scheme uses.

Have you obtained a state pension forecast?

Troytempest

It is specifically stated that it revalues at 7%.

I have written to the administrators for clarification.

Thanks

xylophone

It is specifically stated that it revalues at 7%.

It's possible then that the situation I outlined in my previous applies.

Have a look at this.

https://forums.moneysavingexpert.com/discussion/comment/63406494/#Comment_63406494

Troytempest

Thanks xylophone - I have asked the administrators and will report back.

Troytempest

Have had a further update and because of this am providing a much fuller picture of the situation.

The pension in question here contains both Final salary and Money Purchase elements. Both elements have GMP and non GMP and the date of leaving this employment was October 1996.

The administrators of the scheme were until recently Mercer. A couple of years ago this administration was transferred to a company called Buck.

The only mention of GMP I can find is in 2 letters from Mercer, one in 2003 and a more recent letter from 2012.

The 2012 letter states - ' I confirm that at the date of leaving the scheme your final salary pension was £4677 pa. Of this £1196 was in respect of GMP which increases at 7% pa for each complete tax year until retirement. The remaining £3480 increases by CPI up to 5% pa'

They went on to estimate a Final salary pension of approx £13,800.

Buck have said that the correct figures are £386 pa pre 1988 and £22 pa post 1988 GMP. They revalue these figures at 7% and come up with a total GMP at retirement age in 2023 of £2373 pa which is substantially short of the Mercer figures.

As far as the Money Purchase element is concerned, Mercer stated that the GMP payable at NRD in 2023 would be £4704.
Buck have a figure of £4575 and they give the following explanation.

'I think there may have been confusion in the information provided by the previous administrator. It appears they have included your Money Purchase underpin GMP with your Final Salary GMP. The total of your GMP from both your Old Money Purchase Section (OMPS) benefits and your Final Salary benefits is £1,196.52'

Buck are adamant that the figures they have given are correct.

Do I have to accept this or should I complain to someone (The Trustees?)

Thank yoy

xylophone

Have a look at this link.

https://techzone.abrdn.com/public/pensions/Tech-guide-contracting-out

What  seems to be the case is that in effect, you were a member of two schemes during  your employment with this company.

Presumably when you began employment with this company, you became a member of a COSRS.

This scheme was closed at some point post 1988 (presumably shortly after) and you were then enrolled in a Money Purchase Scheme.

Was this a COMPS or a COMBS (see link).

It seems to me  (no expert) that this may have some bearing on whether or not Mercer were correct in combining the two GMPs.

Do you have a copy of the COSR scheme guide and that of the successor Money Purchase Scheme?

Have you obtained a state pension forecast?

What is the COPE shown?

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/the-new-state-pension-transition-and-contracting-out-fact-sheet

Troytempest

Yes, I do recall that it was originally Final Salary which at some point was closed and we were enrolled into Money Purchase.

1985 to 1988 was Final Salary and then 1988 to 1996 Money purchase.

I am afraid I don't have the original scheme booklets, only annual statements which make no mention of GMP. it is only these 2 letters from Mercer that set out the GMP's in each scheme.

xylophone

 Are the two schemes quite separate?

Scheme 1 Contracted Out Salary Related Pension Scheme.

Is the case that when the scheme closed (presumably a few months after 6/4/88) your situation was as follows?

Pre 88 GMP £386 pa

Post 88 GMP £22

Excess  £3889 (?)

As an "early leaver" (scheme closed) pre 5/4/93, your GMP should have revalued (Fixed Rate) at 7.5%?

And revaluation of excess should have been RPI up to 5%?

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


Scheme 2 Contracted Out (on DB basis) Money Purchase Scheme


 Was this organised on the basis that a member would receive the greater of

(i) the annuity that could be bought with his DC pot

(ii) his DB contracted out benefit (GMP for benefits accrued before 6 April 1997 or Section 9(2b) rights for benefits accrued after 5 April 1997)?


Your GMP in the above would have been £788 revalued at a fixed rate of 7% for 25(?) years?

Was this the only contracted out employment you have had?

What is the COPE shown on your State pension Forecast?

Troytempest

Thanks Xylophone - I am about to disappear for a few days will answer questions at end of week. 

xylophone

I think it would be useful if you could get hold of a scheme guide/guides.

Have you tried the internet?

Do you have any statement of deferred benefits from when you left this employment?

I suppose that there is a possibility that there is one scheme with two sections and you  were concurrently member of both - this would mean that your date of leaving the scheme was in 1996 so that 7% was the correct fixed rate.

There still then remains the question of how to treat the GMP within the Money Purchase Scheme.

Another couple of questions - what is the situation with regard to a PCLS?

What have you been told about increases in payment pre and post age 65?