Deferred GMP and excess pension

alecj62

I have a deferred DB pension from an employer I left in April 1999. I'm about to turn 60 NRA and I've received the pension illustration and it doesn't match previous statements and my own estimate, £14.4k vs £17.3k. Here's some old statements.

I queried it and the difference appears to be that the excess pension will now be reduced by the increase in GMP at 65 rather than it being added on. Here's part of the reply.

Is that last sentence correct? Its not mentioned in any previous documentation

xylophone

I suspect that your pension scheme operates in a similar way to this poster's.

https://forums.moneysavingexpert.com/discussion/4736856/barclays-final-salary-pension-gmp-excess-revaluation-anti-franking/p17

https://forums.moneysavingexpert.com/discussion/comment/75226562/#Comment_75226562

Have you obtained a new state pension forecast?

https://www.gov.uk/check-state-pension

alecj62

Thanks looks complicated. It will take a while to read thru.
Yes, I have a forecast for £197 which it says is the most I can get.

xylophone

Yes, I have a forecast for £197 which it says is the most I can get.

This indicates that despite   a deduction for contracting out,  your "starting amount" at 6.4.16 was higher than a full new state pension.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

At inception, full NSP was actually £155.65.

Since 6/4/16, £155.65 of your starting amount has revalued under the "triple (double this year) lock and the balance by CPI.

alecj62

Is that why the pension admins can subtract all the GMP increase from my excess pension at 65?

xylophone

Is that why the pension admins can subtract all the GMP increase from my excess pension at 65?

No - there is now no direct relationship between your scheme pension and your state pension.

Your scheme might be one of those which imposes a state pension reduction at state pension age  (is it? Check your scheme booklet) but this has nothing to do with GMP.

Have a look at the calculations in red shown in the link in my post above and how it works in that particular scheme.

In effect, at scheme NRA of 60 (which is five years earlier than GMP age for a man), the GMP  remains as it was at date of leaving.

The excess at date of leaving is increased up to age 60.

 Unrevalued GMP plus revalued excess gives   total pension at age 60 which  increases by scheme rules up to age 65.

There is then an illustration/estimate of what the  pension in payment might be at age 65.

 At this point the GMP is revalued, the excess reverts to the amount it was at age 60 and this total is then compared with the  actual pension in payment at age 65.

The pension in payment is increased because of the "step up" at age 65 resulting from the GMP revaluation.

You will note the administrator's explanation

*Increases to Mr Floutier’s pension since Normal Retirement Date are offset against his GMP revaluation; therefore, Mr Floutier’s non-GMP portion reverts to the value at age 60. This is also known as a’ step up’ and for this purpose the amount of ‘step up’ is this example is £5,363.31.

Is this how your scheme works? Ask your administrator for an illustration of what your pension might be at GMP age.

In  another scheme with which I am more familiar, the deferred pension (GMP and excess) come into payment at age 60 and the full amount is increased by uncapped RPI up to age 65.

The pension in payment is then split out into pre 88 GMP (not increased by the scheme), post 88 GMP (increased by the scheme up to 3% CPI) and excess (increased by uncapped RPI).

hyubh

alecj62 said:

I have a deferred DB pension from an employer I left in April 1999. I'm about to turn 60 NRA and I've received the pension illustration and it doesn't match previous statements and my own estimate, £14.4k vs £17.3k. Here's some old statements.

Are both of those screenshots from old statements - in which case, what does the new statement look like...?

Is that last sentence correct? Its not mentioned in any previous documentation

I struggle to take it literally. You're a 1999 leaver so anti-franking applies. The 1.693 quoted is statutory revaluation on excess, and patently a lot lower than the GMP revaluation due. But you aren't given any revaluation on the GMP at all until GMP age. What are the pension increases applicable to the excess? (May be different between pre- and post-97 excess.)

alecj62

The statements are from 2016 and 2011. I'm not an active member so they are the latest I have been given.
Increases are as follows:

I'm partway thru reading the links xylophone has posted but it looks like the pension admin is mostly wrong in the last statement.

xylophone

But you aren't given any revaluation on the GMP at all until GMP age. 

Have you had a look at Mike Floutier's calculation from WTW for his  deferred Barclay's pension taken at scheme NRA?

See his post of 10 October 2013 here

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

hyubh

alecj62 said:

The statements are from 2016 and 2011. I'm not an active member so they are the latest I have been given.
Increases are as follows:

OK, so statutory all round. If the unrevalued, notional GMP is increased as excess between 60 and 65, that's pre-97 excess and therefore 0%. So I don't think 'at GMP age, your excess tranches will be reduced to allow for the increase in GMP tranches' makes sense at all, personally.

One thing you're reported but I still don't quite 'get' - what is the lower figure in the 'pension illustration' in respect of exactly? The pension at age 60, at age 65, or both...? The '£14.4k' seems to be at age 60, yet you've then quoted the administrator's words of what (supposedly) happens at age 65...?

Don't get me wrong, the GMP/excess split being respected between NPA and GPA yet without any revaluation on the GMP since leaving is a marked difference from that not being so in earlier statements. But a lower pension at GMP age is another kettle of fish again.

xylophone

So I don't think 'at GMP age, your excess tranches will be reduced to allow for the increase in GMP tranches' makes sense at all, personally.

I had wondered whether it was a clumsy/garbled version of the explanation given to Mike about GMP revaluation if he took his deferred pension at scheme NRA (rather than pre scheme NRA).

See also

https://forums.moneysavingexpert.com/discussion/comment/79297571/#Comment_79297571