e petition to have loss of Guaranteed minimum Pension (GMP) indexation reinstated by the DWP

Billopp

The loss of GMP indexation has been covered many times over previous years. What I am trying to do is get Parliament to look at it by creating an e-petition which requires 10,000 signatures. See following link to the e petition.

https://petition.parliament.uk/petitions/623532


Restore guaranteed minimum pension (GMP) indexation of the state pensionI want the Government to change the law to reinstate uprating of state pensions in respect of contracted out occupational pensions known as Guaranteed Minimum Pensions (GMP).

More details

I believe it is not fair that the DWP ceased to uprate state pensions in respect of certain pension entitlements when the new state pension was introduced. I believe this with done without adequate consultation or notice, and should be reversed

Sign this petition

The reason I am doing this is that the GMP indexation paid with the state pension was taken away by stealth for people reaching state pension age on and after 6 April 2016 because it was not mentioned in the Green and White papers or debated in parliament. On top of this they did not even bother to tell member of the public affected by the change that they would no longer receive GMP indexation via the state pension so they could plan for the loss.

The DWP were found guilty of maladministration by the Parliamentary Ombudsman on 30 September 2019 for two people who took their cases to the Ombudsman.

 I did a freedom of information request to the DWP in Early 2013 to which you will see they said the following.

https://www.whatdotheyknow.com/request/150015/response/390615/attach/html/2/FoI.2019.response.pdf.html

We are unable to send you any legislation stating that DWP is no longer responsible for 
increases on contracted out schemes pensions because as mentioned above DWP has never 
been responsible for paying those increases. 

Because of the above paragraph I think the DWP ceased paying GMP indexation without it being authorised by parliament so may have done it illegally.

This does not affect people in the public sector as special arrangements were made by the Treasury for public service occupational pension schemes to takeover payment of GMP indexation previously paid by the DWP. 

Possible loss for a woman if inflation was 3% could be up to about £22,000

DullGreyGuy

Billopp said:
What I am trying to do is get Parliament to look at it by creating an e-petition which requires 10,000 signatures. 

If you want parliament to look at it then you need 100,000 signatures, 10,000 just buys you a response from the government.

Given recent events and talk of having to find "efficiencies" in public spending your timing is probably off 

Billopp

I agree you need 100,000 for it to be debated in parliament  but as you mentioned you  need 10,000 for the Government to respond to the petition. But it does have to be done. If you don''t  try then nothing will ever get get changed.

This does not affect me personally as I retired under the old state pension prior to 6 April 2016 and continue to receive GMP indexation via my state pension. 

This affects about 11 million people people. 

It is also being investigate by Stephen Timms, Chair of the Work and pensions Committee. His correspondence with the DWP about it is on the work and pensions committee website. 

xylophone

 DWP has never 
been responsible for paying those increases. 

Oh no?

See

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/guaranteed-minimum-pension-gmp-and-the-effect-of-the-new-state-pension

New State Pension ended government paying living cost increases on your GMP

Each year pension schemes have to increase the amount of GMP built up from April 1988 to April 1997 in line with living costs, this is capped at 3%. This is called ‘indexation’.

Pension schemes did not have to provide indexation to GMPs built up between April 1978 and April 1988.

To stop people with GMPs losing out they could be paid increases to cover living costs through the Additional State Pension. It only applied to people reaching State Pension age before 6 April 2016.

The new State Pension started on 6 April 2016. If you reach your State Pension age on or after this date you will get the new State Pension. You will not get the Additional State Pension from the government which would have included your indexation. These increases ended when the new State Pension started.

Example of how this might negatively affect you:

• if you got a weekly GMP of £35 in 2015 and inflation was 2%, then the next year your Additional State Pension would be a maximum of 70 pence per week higher
• if you reach State Pension age on or after 6 April 2016 you do not get Additional State Pension or these increases

The weekly loss is small for the first year but can build up over time. Somebody with a large GMP reaching State Pension age from April 2016 to March 2017 could have a notable loss over their whole retirement.

It fails to  clarify that  for those eligible, not only was the government responsible for indexing the whole of the pre 88 GMP but also to make it clear that increases over 3% on post 88 GMP were also the responsibility of the government (via the DWP).

Take Mr Brown who receives old state pension.

For example, suppose in 2022/3 Mr Brown's  ASP is shown on his State Pension Statement as £100 a week.

Let's say his pre 88 GMP is £60 and his post 88 GMP £20.00.

His COD from ASP is therefore £80.00.

The ASP received with his SP is £20.00 a week.


Let's say CPI for 23/24 is 10%.

ASP becomes £110.

Pre 88 GMP remains the same.

Post 88 GMP becomes £20.60 (increased by his scheme by 3%)

His COD becomes £80.60

His ASP from the state will be £29.40.

Billopp

xylophone

"DWP has never 
been responsible for paying those increases"

I know you are an expert on the subject of GMP indexation from various posts I have seen from you in the past.

Why is it that the DWP can't tell the truth about GMP indexation and explain in plain English that they were going to cease paying GMP indexation for people reaching state pension age on and after 6 April 2016,

As far as I can see it was not mentioned in the White Paper or debated in Parliament.

If it had been mentioned in the White Paper, I don't think it would have got through parliamentary scrutiny, especially as special arrangements were being made for public service schemes to take over the payment of GMP indexation previously paid by the state/DWP.

 I would be very glad to receive any help you can give to get this known to the public and any suggestions to get my e consultation known to the wider public.

Silvertabby

After a lot of fuffing and faffing, public sector pensions have confirmed that they will pay full GMP increases to post 2016 public sector pensioners.

Nothing (in law)  to stop the private sector pensions from following their lead.

Billopp

Silvertabby


"Nothing (in law)  to stop the private sector pensions from following their lead."

I agree, but they have lost their NI rebate and most probably closed their occupational pension for future accrual as final salary and switched to a defined contribution scheme. Public service schemes were not allowed to reduce benefits under their final salary pension schemes also known as defined benefits.

Some private sector pensions that are ex public service pension schemes such as BT and University pensions have been made to take over the GMP indexation previously paid by the DWP.


Many private sector pensions have closed down and there is no longer an employer to pay for the GMP indexation.

In any case why should they pay for something that was previously promised to be paid by the DWP and they were told that they would never be worse off than if they had never contracted out and had remained in the state additional pension known as SERPS.

 It is the Government that has renegade on the conditions of contracting out and not even bothered to tell anyone that they were not going to pay GMP indexation to people who reached state pension age on and after 6 April 2016.

xylophone

 It is the Government that has renegade on the conditions of contracting out

I am no expert but became interested and did some research on the topic.

Remember that up to 2010, GMP (60 F/ 65M) aligned with GMP age.

The change which  brought about the divergence of GMP age and SPA caused difficulties of its own.

Some schemes sought to address this by continuing to pay increases on the whole pension until SPA came into payment. 

1978  saw the introduction of SERPS. Employers/employees paid additional NI contributions to build up a pension in addition to the basic state pension.

However, in return for guaranteeing a pension that was at least as great as would be provided by SERPS, employers/employees could contract out of the SERPS scheme and pay lower NI contributions.

As a sweetener to employers, the state guaranteed that when the state pension came into payment, ( and in the case of men especially this was often several years after the occupational scheme came into payment) it would pay inflation linked increases on that part of the occupational pension that represented the GMP.

In 1988, the government wished to save money on the inflation linking guarantee and therefore the requirement became that the Occupational Scheme would have to inflation link that part of the occupational pension representing post 88 GMP up to 3%- if inflation was over 3% the government would pay the balance.

The GMP scheme ended in 1997.

When an individual drew his/her occupational pension, the whole of it would have increased in payment according to Scheme rules up to State Pension Age (GMP age).

However, at SPA, a calculation would have been done splitting the occupational pension into its component parts  as follows -

pre 1988 GMP This amount remained constant.

1988-1997 GMP

What remained over and above - the "excess"

At the same time, NICO would have calculated what he/she would have accrued in additional state pension had he/she not been contracted out during the years 1978-1997.

This is was the pre 97 ASP shown on the state pension statement.

The statement then showed a Contracted Out Deduction - in effect this was the GMP.

What was left was the amount of ASP that would be paid with the State Pension and indexed annually as described in my post above.

The Scheme member would receive a letter along the following lines from the Administrator of his occupational pension scheme

We refer to your pension paid by XYZ Pension Fund.

We have now received confirmation from HMRC of the amount of GMP that is payable from your 65th birthday.

The GMP elements of your pension increase in payment at different rates to your main fund pension. We therefore detail below the revised split of your pension and the future increases that you will receive from the Fund.

Pre 1988 GMP £ xxx per annum No Increase from the Fund. Increase may be provided by the State and paid with your State pension.

Post 1988 GMP £yyy per annum Increase in line with CPI up to a maximum of 3% each year. Any increase in excess of 3% will be provided and paid by the State

Fund Excess Pension £zzz per annum In line with the (whichever index applies to your fund)

There were cases ( usually where an individual had had a deferred pension that increased  GMP at Fixed Rate) where the COD was far higher than the notional ASP calculated by NICO.

In these circumstances, the individual had no index linking on his pre 88 GMP and only up to 3% on his post 88 GMP until such time as his ASP was greater than his COD - this year, next year, sometime, never.....

As things stand (currently), it is those who reached SPA within a couple of years of inception of NSP who are most badly affected.

As has been described in many other posts, those reaching SPA later have the prospect of increasing their entitlement to NSP the whole of which increases (at the moment) under the "triple lock".

And yes, the Government did "look after its own" in respect of public service pensions....

 

 

Billopp

xylophone

As has been described in many other posts, those reaching SPA later have the prospect of increasing their entitlement to NSP the whole of which increases (at the moment) under the "triple lock".

Not strictly true as triple lock is only payable up to maximum new state pension and CPI on anything in excess of the maximum NSP which is additional state pension subsumed into the NSP and is called a protected payment.

One thing I would like to point out is that the NSP of £185.15 pw is nowhere near as generous as the old state pension when you add basic state pension of £141.85 pw which receives triple lock to additional state pension of £185.90 pw which receives CPI which makes a total of £327.75pw so the NSP can be up to about £140 pw less generous than the old for a high earner.

As far as I am aware the DWP did not mention to anyone that they would earn much less under the NSP than the old so that they can plan for the loss.

xylophone

When I said NSP I meant full New State Pension  not the "Protected Payment".

I have added "full"  (and the current amount ) above for clarity.

When the "starting amount" for NSP was calculated, those who had already accrued an amount in excess of (then) £155.65 had the amount of that excess termed a "protected payment".

Of course part of the £155.65 would have included some additional state pension.

The calculations were

Old Rules

NI years (max 30)/full BSP + (Additional State Pension - (where applicable) Deduction for Contracting Out.

New Rules

(NI years (max 35)/full NSP) - (where applicable) Contracted Out Pension Equivalent.

The starting amount was the higher of the two.

Thus part of the entitlement had the potential to increase at a rate above CPI.

xylophone

One thing I would like to point out is that the NSP of £185.15 pw is nowhere near as generous as the old state pension when you add basic state pension of £141.85 pw which receives triple lock to additional state pension of £185.90 pw which receives CPI which makes a total of £327.75pw so the NSP can be up to about £140 pw less generous than the old for a high earner.
As far as I am aware the DWP did not mention to anyone that they would earn much less under the NSP than the old so that they can plan for the loss.

The above is not relevant to the question of GMP increases.

Those who had a working life and NI contributions prior to 2016 will receive the state pension to which they were entitled up to that point. The basic and additional is taken into consideration.

Those who start working life/NI contributions from 6/4/2016 will need 35 years NI to qualify for a full NSP.

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