DB Deferred pension increases question

trevjl

The big hand in my notice day is imminent and although I wont be taking this until NPA of 65 in 4 and a half years time I have had a recent statement which has risen by 6% since the last statement 12 months ago. This got me to checking the rises after the pension comes into payment. Below is what it says. I understand it apart from part (i), can anyone throw any light on what that means. TIA
EDIT: the bit obscured at the bottom of part (iii) says subject to a maximum of 5%

Pat38493

I think it means that there is a part of your pension "Guaranteed minimum pension" which is related to you having been contracted out of the national insurance state pension scheme during that time.

It appears to say that this part of your pension will increase with inflation with no cap, which I guess is good - the DB scheme has to pay the first 3% and NI (taxpayer) will pay the rest if inflation > 3%.

This actually raises an interesting point for me also because for my DB pension, the pension went through a process of "GMP equalisation" there they converted the GMP into "normal pension".  They stated at the time that nobody would lose out because of this.  However when I look at the details, they have moved the GMP part to a section "Pre 6th April 1997 XS" which has a fixed 3% uplift every year.  They have also added a bit extra, presumably to compensate me for the uncapped increases on the GMP part.  Therefore I guess there statement that I would never lose out is dependent on inflation not running rampant for a lot of years.

You may also want to check what they mean by increasing with inflation - RPI or CPI.

hyubh

trevjl said:

The big hand in my notice day is imminent and although I wont be taking this until NPA of 65 in 4 and a half years time I have had a recent statement which has risen by 6% since the last statement 12 months ago. This got me to checking the rises after the pension comes into payment. Below is what it says. I understand it apart from part (i), can anyone throw any light on what that means. TIA
EDIT: the bit obscured at the bottom of part (iii) says subject to a maximum of 5%

Part (i) is out of date. You can take it as meaning that any post-88 GMP component of your pension will increase by CPI capped to 3%. And if you have any pre-88 GMP, then that is non-increasing.

The wording about the state pension only applied under the pre-2016 state pension system, and even then, only with caveats. Depending on how long you were 'contracted out' before, the chances are you still won't have lost out due to post-16 state pension accrual, but the details are complex.

Pat38493

hyubh said:

trevjl said:

The big hand in my notice day is imminent and although I wont be taking this until NPA of 65 in 4 and a half years time I have had a recent statement which has risen by 6% since the last statement 12 months ago. This got me to checking the rises after the pension comes into payment. Below is what it says. I understand it apart from part (i), can anyone throw any light on what that means. TIA
EDIT: the bit obscured at the bottom of part (iii) says subject to a maximum of 5%

Part (i) is out of date. You can take it as meaning that any post-88 GMP component of your pension will increase by CPI capped to 3%. If you have any pre-88 GMP, that isn't mentioned, but I would assume it is non-increasing.

The wording about the state pension only applied under the pre-2016 state pension system, and even then, only with caveats. Depending on how long you were 'contracted out' before, the chances are you still won't have lost out due to post-16 state pension accrual, but the details are complex.

If that's the case, it must mean that these statements were changed by subsequent legislation (and also invalidate one of the comments in my reply).

trevjl

Thanks, that was produced in 2010 so not surprising it is out of date. That part only makes up about 10% of the full amount.

Marcon

trevjl said:

Thanks, that was produced in 2010 so not surprising it is out of date. That part only makes up about 10% of the full amount.

It's well and truly out of date. Go back to the scheme and ask for up to date information - and if that's what you have received recently, make sure you point out it needs to be updated.

trevjl

Marcon said:

trevjl said:

Thanks, that was produced in 2010 so not surprising it is out of date. That part only makes up about 10% of the full amount.

It's well and truly out of date. Go back to the scheme and ask for up to date information - and if that's what you have received recently, make sure you point out it needs to be updated.

I have asked for an explanation, awaiting reply.
That is not a recent document, that was sent out in 2010 when the scheme closed, in 2013 it was merged with the scheme of the company that took over. All I can find is a document listing the changes from old to new, nothing in there about before and after payment commencement rises.
I will have to go back to them and see if I can get an up to date scheme rules booklet.

xylophone

Thanks, that was produced in 2010 so not surprising it is out of date. 

Therefore pre introduction of New State Pension.

The way things used to be....

https://forums.moneysavingexpert.com/discussion/comment/60448917/#Comment_60448917

https://forums.moneysavingexpert.com/discussion/4532605/totally-confused-by-contracted-out-deduction-letter/p3

and read on if interested.

However, you have fallen into the new regime as regards state pension and the system described in the thread above no longer exists.

See

https://forums.moneysavingexpert.com/discussion/comment/80110845/#Comment_80110845

With regard to your scheme pension, it is quite likely that you will see no increase on your revalued (at GMP age) pre 88 GMP, up to 3% CPI on revalued post 88 GMP and increase on the excess as in scheme rules.

How will your pension revalue in deferment?

And what exactly is shown on your state pension forecast?

trevjl

With regard to your scheme pension, it is quite likely that you will see no increase on your revalued (at GMP age) pre 88 GMP,

I joined the scheme on 6th April 1988 so there is zero pre 88. it states this in the paperwork

How will your pension revalue in deferment?

trevjl

And what exactly is shown on your state pension forecast?

Thanks all for your input

hyubh

trevjl said:

With regard to your scheme pension, it is quite likely that you will see no increase on your revalued (at GMP age) pre 88 GMP,

I joined the scheme on 6th April 1988 so there is zero pre 88. it states this in the paperwork

How will your pension revalue in deferment?

So, fixed rate GMP revaluation. Makes the 'State Pension' phrasing from (D) (i) even tenuous at the time.

The general idea was that GMP paid by the occupational scheme replaced the SERPS paid by the state that you would have got had you contracted in. The state would however maintain a notional SERPs pension figure, and when the 'revalued' (before 65) and 'increased' (from 65) GMP fell behind it, you would get the difference with your state pension.

Nevertheless, the occupational scheme would have to pay your GMP even if that surpassed the SERPS you would have got had you not contracted out. This would be possible if you left before state pension age, and the scheme used 'fixed rate' GMP revaluation, since the fixed rate (4% in your case) may turn out higher than the measure used for SERPS (increase in national average weekly earnings). As things currently stand, that is indeed the case, and it would take some years of above 3% price inflation after 65 for the notional SERPS to catch up. In addition, you will be getting a full single tier state pension, which - depending on how long you contracted out for - is likely more than the state pension you would have got under the old system. So not a bad deal, even though the administrator's communications may make it sound even better!