Barclays 1964 pension - payment change at GMP age for anyone taking pension at ERD

DT2001

I started a thread recently discussing GMP equalisation calculations. Willis Towers Watson (WTW) who administer the scheme seemed to ignore some of my questions however those they answered lead me to believe that the information given to me in 2018 (which was obtained with the help of some MSE forumites) may have been incorrect. I recently asked if my excess pension would be partially or fully franked and received this reply

Thank you for your email.

 

I confirm that your entire excess pension can be franked to provide for the Guaranteed Minimum Pension (GMP) at GMP payment age, i.e. full franking.

This is contrary to the reply I received in 2018 

 Thank you for your email below.

I can confirm that your understanding of how the pension payable at your GMP and state pension deduction age is calculated is correct. As previously advised we are unable to confirm the exact figures until nearer the time.

If you have any questions please contact us.

Kind regards


Pensions Administrator

The Barclays Team
Willis Towers Watson





I refer to our recent correspondence and in particular your email of 18th August enclosing the booklet ‘What happens to your pension when you leave Barclays’ . I would like to put into figures the information that you have provided. I have used the example on page 10 of the booklet that you sent as guidance.
Can you confirm that the method is correct. If any part is wrong please provide me with an example appropriate to early retirement.


Pension at date of leaving membership of the scheme 31/12/1995
Designated GMP portion £1339
Non GMP portion £4661.32
Total deferred pension £6000.32

Estimated pension at 1/11/2011
Designated GMP portion £1339
Non GMP portion (including annual increases since leaving active membership) £7396

Total deferred pension £8735

Reduced by an actuarial figure of 0.626 £5468

Estimated actuarially reduced value of Non GMP portion at 1/11/2011
£7396 * 0.626 (figure from 2003 quote) £4629

Actual pension paid at ERA (1/11/2011) including an element of step up £6571
less estimated pension just actuarially adjusted £5468
Amount of adjusted non GMP increases step up £1103


Estimated total pension on day before 65th birthday (20/5/2025)
This assumes total pension increases from £7559 (as of today) by 2.5% p.a. £8985

Estimated pension at GMP payment date (21/5/2025)
GMP portion (£1339 revalued at 7% for each complete tax year since
leaving active service) £9529
Non GMP portion (see note 1 below) £4629
estimated total pension in payment from age 65 from the scheme £14158

Estimated pension at SPA (66 and 2 months) = £14158 plus increase since GMP age by £218 (Non GMP portion increased by RPI say 2.5%,
Pre 88 GMP (£4873.67) by 0% and post 88 GMP (£4655.33) by CPI, say 2.2%) less SPD £666 - £13710

Note 1
Increases in pension from retirement date are offset against GMP revaluation therefore non GMP
portion reverts to actuarially adjusted value at drawdown on 1/11/2011
This is also known as a 'step-up' and in this example is £5173

In addition a forumite found the following information 

The 1993 act sections 87-92 provides what it calls "protection of increases in guaranteed minimum pensions ("Anti-Franking")".

And, if that weren't enough, Appendix 1, section 7 of the Barclays 1964 scheme rules explicitly rules it out. The only exceptions it cites are sections 37A and 41A-E of the 1975 act. (These are actually labeled "37(1) & 41(1-5)" in the Act itself; just to add to the confusion). These sections cover certain issues with regard to widows and widowers AND also the priority of distribution of assets in the event of Barclays going bust (i.e. GMP gets into the lifeboat first) - doesn't apply to our thinking.

At GMP age, 65, assuming inflation is at or above 5% for the annual increases my GMP element will ‘Frank’ all bar a few £’s. This will leave me £4.5k worse off than advised in 2018. I know it is a very complex set of rules/regulations and there is the caveat that the rules should be applied properly (I think it means if WTW or prior to that the in-house team at Barclays provide incorrect information you do not necessarily have any comeback because it is to the detriment of other other scheme members). An ERD leads to an actuarial reduction so that the ‘whole’ pension payable is roughly equal for whenever you retire however as these figures do not need to given how can you check to see if the franking of the excess by the GMP is taken into account.

Does anyone know how I should proceed to query the confusion? Can I take it to the pensions ombudsman to get a definitive ruling on the methodology?

xylophone

I confirm that your entire excess pension can be franked to provide for the Guaranteed Minimum Pension (GMP) at GMP payment age, i.e. full franking.

"Can be" (ie the law permits) or "will be" (ie, this is how your scheme operates)?

See

https://expertpensions.co.uk/lets-be-frank-what-do-you-know-about-gmp-franking-by-douglas-watson/

If a member retires early, then anti-franking protection is forfeited. The scheme need only test that GMP is covered at GMP age and the entire excess pension can be franked to provide for this.

Whilst I have provided a simplistic view of the exceptions and conditions, this is intended to provide you with an awareness of anti-franking rules rather than an all-encompassing guide. It would therefore be prudent to do some further research if you are unsure how anti-franking applies to the particular scheme you are dealing with.

Perhaps you could write to WTW on the basis that as you are now within five years of GMP age (65) and SPA (66), you are trying to plan for your financial future.

In the circumstances, please would they explain how the Scheme Pension you currently receive will increase after age 65 and how the SPD will be applied once you reach SPA?

https://epa.towerswatson.com/accounts/barclays/public/barclays-bank-ukrf-news-normal-retirement-date/#:~:text=If you take your benefits earlier than your NRD&text=Normally, the earliest you can,benefits, contact the Barclays Team.

Get ready before NRD

You should ideally start thinking about your retirement plans a good 10 years before your NRD. This gives you time to consider all of your options 

xylophone

As an observation on the Barclays DB Scheme, neither you nor Mike F can be the very first members of the scheme to take a deferred pension before NRD/after NRD.

This is why I am mystified by the fandango surrounding getting answers to your questions. 

Surely those answers or at the least the methodology used to reach the answers is already known?

Marcon

DT2001 said:

I started a thread recently discussing GMP equalisation calculations. Willis Towers Watson (WTW) who administer the scheme seemed to ignore some of my questions however those they answered lead me to believe that the information given to me in 2018 (which was obtained with the help of some MSE forumites) may have been incorrect. I recently asked if my excess pension would be partially or fully franked and received this reply

Thank you for your email.

 

I confirm that your entire excess pension can be franked to provide for the Guaranteed Minimum Pension (GMP) at GMP payment age, i.e. full franking.

This is contrary to the reply I received in 2018 

 Thank you for your email below.

I can confirm that your understanding of how the pension payable at your GMP and state pension deduction age is calculated is correct. As previously advised we are unable to confirm the exact figures until nearer the time.

If you have any questions please contact us.

Kind regards


Pensions Administrator

The Barclays Team
Willis Towers Watson





I refer to our recent correspondence and in particular your email of 18th August enclosing the booklet ‘What happens to your pension when you leave Barclays’ . I would like to put into figures the information that you have provided. I have used the example on page 10 of the booklet that you sent as guidance.
Can you confirm that the method is correct. If any part is wrong please provide me with an example appropriate to early retirement.


Pension at date of leaving membership of the scheme 31/12/1995
Designated GMP portion £1339
Non GMP portion £4661.32
Total deferred pension £6000.32

Estimated pension at 1/11/2011
Designated GMP portion £1339
Non GMP portion (including annual increases since leaving active membership) £7396

Total deferred pension £8735

Reduced by an actuarial figure of 0.626 £5468

Estimated actuarially reduced value of Non GMP portion at 1/11/2011
£7396 * 0.626 (figure from 2003 quote) £4629

Actual pension paid at ERA (1/11/2011) including an element of step up £6571
less estimated pension just actuarially adjusted £5468
Amount of adjusted non GMP increases step up £1103


Estimated total pension on day before 65th birthday (20/5/2025)
This assumes total pension increases from £7559 (as of today) by 2.5% p.a. £8985

Estimated pension at GMP payment date (21/5/2025)
GMP portion (£1339 revalued at 7% for each complete tax year since
leaving active service) £9529
Non GMP portion (see note 1 below) £4629
estimated total pension in payment from age 65 from the scheme £14158

Estimated pension at SPA (66 and 2 months) = £14158 plus increase since GMP age by £218 (Non GMP portion increased by RPI say 2.5%,
Pre 88 GMP (£4873.67) by 0% and post 88 GMP (£4655.33) by CPI, say 2.2%) less SPD £666 - £13710

Note 1
Increases in pension from retirement date are offset against GMP revaluation therefore non GMP
portion reverts to actuarially adjusted value at drawdown on 1/11/2011
This is also known as a 'step-up' and in this example is £5173

In addition a forumite found the following information 

The 1993 act sections 87-92 provides what it calls "protection of increases in guaranteed minimum pensions ("Anti-Franking")".

And, if that weren't enough, Appendix 1, section 7 of the Barclays 1964 scheme rules explicitly rules it out. The only exceptions it cites are sections 37A and 41A-E of the 1975 act. (These are actually labeled "37(1) & 41(1-5)" in the Act itself; just to add to the confusion). These sections cover certain issues with regard to widows and widowers AND also the priority of distribution of assets in the event of Barclays going bust (i.e. GMP gets into the lifeboat first) - doesn't apply to our thinking.

At GMP age, 65, assuming inflation is at or above 5% for the annual increases my GMP element will ‘Frank’ all bar a few £’s. This will leave me £4.5k worse off than advised in 2018. I know it is a very complex set of rules/regulations and there is the caveat that the rules should be applied properly (I think it means if WTW or prior to that the in-house team at Barclays provide incorrect information you do not necessarily have any comeback because it is to the detriment of other other scheme members). An ERD leads to an actuarial reduction so that the ‘whole’ pension payable is roughly equal for whenever you retire however as these figures do not need to given how can you check to see if the franking of the excess by the GMP is taken into account.

Does anyone know how I should proceed to query the confusion? Can I take it to the pensions ombudsman to get a definitive ruling on the methodology?

Have you actually been through the scheme's Internal Dispute Resolution Procedure? If not, that's your next step.

DT2001

xylophone said:

I confirm that your entire excess pension can be franked to provide for the Guaranteed Minimum Pension (GMP) at GMP payment age, i.e. full franking.

"Can be" (ie the law permits) or "will be" (ie, this is how your scheme operates)?

See

https://expertpensions.co.uk/lets-be-frank-what-do-you-know-about-gmp-franking-by-douglas-watson/

If a member retires early, then anti-franking protection is forfeited. The scheme need only test that GMP is covered at GMP age and the entire excess pension can be franked to provide for this.

Whilst I have provided a simplistic view of the exceptions and conditions, this is intended to provide you with an awareness of anti-franking rules rather than an all-encompassing guide. It would therefore be prudent to do some further research if you are unsure how anti-franking applies to the particular scheme you are dealing with.

Perhaps you could write to WTW on the basis that as you are now within five years of GMP age (65) and SPA (66), you are trying to plan for your financial future.

In the circumstances, please would they explain how the Scheme Pension you currently receive will increase after age 65 and how the SPD will be applied once you reach SPA?

https://epa.towerswatson.com/accounts/barclays/public/barclays-bank-ukrf-news-normal-retirement-date/#:~:text=If you take your benefits earlier than your NRD&text=Normally, the earliest you can,benefits, contact the Barclays Team.

Get ready before NRD

You should ideally start thinking about your retirement plans a good 10 years before your NRD. This gives you time to consider all of your options 

Thank you.
I think you are correct with your links. It is just disappointing that I was given incorrect information in 2018 and it would be good to know that the calculation regarding actuarially reduction was on the correct basis.

How can you consider your options if you can’t get access to the correct information!

xylophone

 It is just disappointing that I was given incorrect information in 2018 

But it is not yet established that you were?

You will need to get a definitive answer in writing from WTW.

If they simply will not (or cannot?) co-operate, you will need to raise a complaint as above.

Ultimately you might need to approach the Trustees?

https://epa.towerswatson.com/accounts/barclays/public/barclays-bank-trustee-board/

DT2001

xylophone said:

 It is just disappointing that I was given incorrect information in 2018 

But it is not yet established that you were?

You will need to get a definitive answer in writing from WTW.

If they simply will not (or cannot?) co-operate, you will need to raise a complaint as above.

Ultimately you might need to approach the Trustees?

https://epa.towerswatson.com/accounts/barclays/public/barclays-bank-trustee-board/

Thank you.
I have sent an email asking 4 questions : -
1. Will there be full franking?
2. What happens at SPA regarding the SPD. It was set at £666 when I left the scheme. If inflation continues at or above 5% for the next two years AND my excess is fully franked there will only be £188 excess at SPA. If inflation is lower the excess will be lower.
3. If they confirm full franking WILL apply which contradicts there 2018 email who do I take the issue of receiving contradictory information up with? Themselves or the IDRP.
4. On the current website it says if you take your pension early the payments MAY be reduced to take into account the longer term. I have provided them with a calculation assuming taking a pension at NRD (and thus getting a step up at 65) and living until 82 (mid point between original male life expectancy of someone born in 1960 and a 62 year old now). Previously they advised they could not provide the calculation figures however I have asked them to check the methodology on the basis that the rules were being interpreted differently around that time (not by WTW but the in-house team). I have a letter in 2011 stating that the treatment of GMP had been too generous and would then be in accordance with the scheme rules! 

My calculation shows a big difference however it is a matter of ‘I do not know what I do not know’!
I have given them the option for me to refer to the trustees as they were not administering the pension scheme then.

I know the worst case scenario and hopefully they will be in a better position to advise retirees in the future regarding the effects when reaching GMP age.

Happy New Year to all.

DT2001

WTW have replied

As your pension was put into payment before your Normal Retirement Date a step-up calculation was included as part of the early retirement calculation. It projected the future increases to applied to your pension based on assumptions provided by the Scheme Actuary and then compared this to the GuaranteedMinimumPension(GMP) that will come into payment at age 65. If the value of your GMP was higher then a “step-up”in the pension payable would have been given from the early retirement date.

This means that at your GMP age there will be no further increase in the pension unless the pension in payment is below your GMP amount (£9525.88). In this situation the pension will be increased to the amount of the GMP. We are unable to advise if this will be the case at the present time as we do not know what the future increases will be.

If your pension is entirely made up of GMP at your State Pension Deduction(SPD) date then the SPD will not be applied.

If you had not taken your pension until age 60 the pension would have been made up of the excess at date of leaving revalued by the scheme revaluation rate to the normal retirement date plus the GMP amount at date of leaving. Using an example amount of 2.5% a year as the scheme revaluation rate this would have given an annual pension amount, before any commutation for tax free cash, of about £9700.00 a year;

Excess Scheme pension at date of leaving - £461.32X2.5%for24years=£8431.05 Guaranteed Minimum Pension at date of leaving=£1339.00

At your GMP date the pension would then receive a step up in payment to approximately £17800.00 a year before any commutation for tax free cash;

Excess Scheme Pension at date of leaving- £461.32X78.3%(statutory revaluation)=£8311.13 Revalued GMP amount=£9525.88

You would not however have received any pension payments between 1November 2011 and 21May 2020.This amounts to a gross figure of approximately £61000.00.

WTW have answered

1. The question of franking - the pension will be fully franked at 65

2. No State Pension Deduction at SPA unless there is some excess left. If inflation is 5% or more this year (the scheme has amax of 5% hikes) and 2.5% next I will have an excess of £17. If inflation is higher I will get a step up to the GMP amount.

3. Ignored

4. Confirmed the alternatives with slightly different figures. It shows, I think, the crossover is at 72 years of age where I start to 'lose' in terms of the total amount I receive. This is on the basis of full franking and ignores the differences in uprating the excess and GMP elements (which have changed since my initial drawdown in 2011). I am of course unsure what factors are taken into account when calculating the reduced amount paid for a longer term. Simplistically I calculated the total amounts payable to 82 (rough estimate of life expectancy for someone aged 51 in 2011). The difference is £75k. If partial franking applied the difference is £20K. What is having had £61k before NRD worth?

My way forward is, as suggested, to proceed to the Internal Dispute Resolution Procedure. My thinking is to ask on two fronts: -

1. Change of information from 2018 to 2023, from WTW, of the method applicable at GMP. My retirement plans now have a reduction of £4.5k p.a.

2. To ask if the original actuarial reduction can be checked on the basis of paying equal amounts over a longer term. I think it was unclear about what would happen at 65 (the guidance notes refer to a worked scenario but only for NRD).

Does anyone have any comments/suggestions about how I approach the IDRP or if I should be asking anything else     

xylophone

Just a thought - your GMP is both pre and post 1988?

Is there not a requirement for the scheme to provide an increase of up to 3% CPI  on post 88 GMP once your pension is split into its component parts at age 65?

https://www.gov.uk/guidance/provide-a-pension-for-your-scheme-member

DT2001

xylophone said:

Just a thought - your GMP is both pre and post 1988?

Is there not a requirement for the scheme to provide an increase of up to 3% CPI  on post 88 GMP once your pension is split into its component parts at age 65?

https://www.gov.uk/guidance/provide-a-pension-for-your-scheme-member

Yes. I reckon it will 50/50 split between, as you say, 3% CPI and no increase. So just hope for low inflation for a while.

DT2001

Submitted query/complaint to the Internal Dispute Resolution Procedure. I have asked: -
1. Do the scheme rules permit full or partial franking in relation to ERD
2. If full franking applies do I have recourse against WTW as they have advised 2 differing methods to calculate my pension at GMP
3. Will they check the calculation at ERD bearing in mind the confusion relating to GMP around that time.
4. Confirm that SPD will not apply if all the pension is GMP even any CPI increase between GMP age and SPA.

Now we wait for 2 to 4 months depending on if it is considered ‘simple’ or ‘complex’