GMP, COD and future inflation above 3%

Russ4yew

My pension under the Local Government Pension Scheme contains an element under Guaranteed Maximum which relates to contracted out. My state pension from 2015 contains adjustment for Contracted Out Deduction. All fine when inflation below 3% however I asked the question what will happen next year when CPI could be a 10% adjustment. Answer given is that State Pension will be liable to pick up increase on whole Public Sector pension above 3%! Surely this can't be right.  I am of course under the old rules having taken my State Pension April 2015.

Silvertabby

Not all of your LGPS pension, just your post 88 GMP (and all of the increase on your pre 88 GMP).

This has always been the case, but when inflation/CPI is low most people don't notice.

Going forward, those of us who reached SPA after April 2016 will have all increases paid by the LGPS/other public sector pension, so 6 of one and half a dozen of the other.

xylophone

My pension under the Local Government Pension Scheme contains an element under Guaranteed Maximum which relates to contracted out.

You were a member of LGPS between 1978 and 1997?

Then you have a Guaranteed Minimum Pension.

Are you male?

Your statement from LGPS should show how much of your pension is pre 88, how much is post 88 and how much is excess over GMP.

https://www.wypf.org.uk/pensioner/all-about-my-pension/whats-gmp-and-how-does-it-affect-me/

Your Increase in benefit  (State pension) letter next March should show your position on the increase in your pre 97 additional state pension.

Let's suppose that currently a certain person's pre 97 ASP is shown as £100.

Let's say his COD is shown as £80 and is made up of £50 pre 88 GMP and £30 post 88 GMP.

This is deducted from the ASP.

He receives £20 with his state pension.

Let's say that CPI in September next is 10%.

The pre 97 ASP becomes £110.00

The pre 88 GMP does not increase. 

The post 88 GMP increases by 3%  to £30.90

The COD becomes £80.90

in April 2023  he receives £29.10 with his state pension.