Delay pension 'til April for GMP Revaluation? 19 August 2022 at 11:09PM in Pensions, annuities & retirement planning 8 replies 566 views

thevilla

This is likely to be one of those 'it depends' questions but please bear with me.

I'm 2 years retired and living off a small DC pension until commencing a DB pension on my 61st birthday in December this year.  The DC pot will be spent by then.

I understand from the DB quotation pack that my GMP is revalued at the end of each financial year for each completed FY.

With inflation hitting 10+% should I defer starting my pension from December to April to bake in this revaluation?  Deferring would be financed using savings so would the benefit outweigh the cost of burning, say £6k savings or is it likely to be insignificant?  I don't really have a clue what proportion of my low £20'sK annual pension is GMP.

My pensionable service was 1982 - 2016 if that's relevant.  I have an up to date SP forecast.

Thanks for you thoughts.

arnoldy

Is this a Private Sector DB? Deferred Private Sector DB pensions have a few quirks. Usually there are increases for each new calendar year and number of complete years in deferment.

So, increases may very well be due 3 times a year with GMP. It is worth asking your pension administrator. To complicate things there is the early retirement factors, the fact that sometimes the accrued pension can go down slightly at each of the above points (but the general trend will always be up) and when you put the pension into payment there is a policy about the first year increases - depending when it was put into payment.

hyubh

thevilla said:

I'm 2 years retired and living off a small DC pension until commencing a DB pension on my 61st birthday in December this year.  The DC pot will be spent by then.

I understand from the DB quotation pack that my GMP is revalued at the end of each financial year for each completed FY.

The statutory requirement is for the scheme to pay your revalued GMP at GMP age (65 for a man). If you draw your pension before then, it's down to the scheme how they treat the GMP. One common approach is to treat the whole pension as excess (so, pretend there was no GMP and use excess revaluation to date of retirement for the whole pension), but that's only one approach. However at age 65, the GMP revalued to that date (not retirement) will be due regardless, i.e. the pension already in payment will get adjusted as applicable to (excess revalued to DOR + increases in payment on that excess to date) + (GMP revalued to GMP age). 

With inflation hitting 10+% should I defer starting my pension from December to April to bake in this revaluation?

If the scheme uses 'fixed rate' revaluation for GMP, inflation will be irrelevant for revaluing it anyway. Even the alternative ('full rate' alias 'S148') is wage/salary inflation not price inflation. (The third possibility is 'limited rate', available for pre-97 leavers only, is a capped form of S148.)

Statutory excess revaluation, however, is based on price inflation.

I don't really have a clue what proportion of my low £20'sK annual pension is GMP.

Should be on the statement of deferred benefits provided after leaving, if you don't still have it, ask the scheme administrator for the breakdown.

xylophone

Are you male or female?

What does your scheme guide say about how GMP is revalued in deferment?

Is your scheme private or public sector?

1982 - 2016 

Which gives you pre 88 GMP
Post 88 GMP (to 1997)
Excess over GMP.

Your statement of deferred benefits on leaving the scheme should show this.

What exactly does your state pension forecast say?

What is the COPE shown?

thevilla

Thank you hyubh and xylophone for your replies.   You reminded me that this information should be available from my pension administrator and I have now found that my total gmp was about £1500 / Yr (2014 not 2016).  The scheme uses a fixed rate revaluation.   In view of that I think I'm worrying over a relatively trivial amount and will pull the trigger in December as planned.

State pension is 2 years short of full NI contributions (8 of 10,   38 total years inc. c/out) for maximum sp and I'll buy those prior (a year or so) to my 67th birthday.

Thanks again. This thread taught me a great deal in the lead up to retiring a couple of years ago.

hyubh

thevilla said:

Thank you hyubh and xylophone for your replies.   You reminded me that this information should be available from my pension administrator and I have now found that my total gmp was about £1500 / Yr (2014 not 2016).  The scheme uses a fixed rate revaluation.

With respect to your original question then, the GMP as GMP is completely unaffected by inflation since you left in 2016. Your question should really be, how much will the excess be affected by different retirement dates, specifically during or after this calendar year (https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/).

thevilla

hyubh said:

thevilla said:

Thank you hyubh and xylophone for your replies.   You reminded me that this information should be available from my pension administrator and I have now found that my total gmp was about £1500 / Yr (2014 not 2016).  The scheme uses a fixed rate revaluation.

With respect to your original question then, the GMP as GMP is completely unaffected by inflation since you left in 2016. Your question should really be, how much will the excess be affected by different retirement dates, specifically during or after this calendar year (https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/).

I see.  So I should consider waiting until January if I think it is likely that next year's Occupational Pensions Revaluation will result in a bigger revaluation figure, presumably related to recent high inflation.  Food for thought.

Thanks again.

thevilla

Just a quick update. 

I called my pension administrator about revaluation and didn't get any useful information from the call handler.  I delayed 'til January anyway as it didn't really inconvenience me and just found out my pension will be nearly £2k more than the December estimate.  I can only assume this is due to the revaluation as suggested here.

Thanks again to those who took the time to give me advice.

Pat38493

thevilla said:

Just a quick update. 

I called my pension administrator about revaluation and didn't get any useful information from the call handler.  I delayed 'til January anyway as it didn't really inconvenience me and just found out my pension will be nearly £2k more than the December estimate.  I can only assume this is due to the revaluation as suggested here.

Thanks again to those who took the time to give me advice.

It might be too late here because I missed the original thread, but if this is a deferred DB pension, you will often get a better pension by waiting until after the anniversary date of when the pension was originally deferred - i.e. if your deferement date was 1st June, wait until after 1st June to trigger the DB.

This is because when they use the occupational pension revaluation tables, it works on whole years so if you retire before your deferement date, they count one less back so you get a lower pension.