Pre-1988 GMP fiasco

Pat38493

You can get your pension scheme administrators to reply on a Sunday.  Wow.  With my DB pension scheme administrators it’s lucky if you get a reply in 3 months.

xylophone

From the links sent by Xylophone it would appear that I am protected by anti-franking

Be careful - read the link again, in particular

What is Franking?

In occupational final salary pensions, there are circumstances where one tranche, or slice of benefits can be offset against increases in another. This is known as franking.   Full Franking  The most widely known example of Full Franking is for members who left their pension scheme prior to 1 January 1985 with some GMP.  Schemes were permitted to let any increases on the GMP before retirement effectively be absorbed by the non GMP pension.  For leavers after 31 December 1984, this practice was prohibited by the Anti-Franking legislation; however there are still common scenarios where Full Franking is permitted for post 85 leavers.  Do you fit into one of those scenarios? If so, perhaps this is the reason  only the GMP which as at 01-Aug-23 they calculate to be £4,521.82 is payable.

You will need to check with the Administrator.

With regard to the "step up at age 65", have a look at this https://www.gov.uk/government/publications/equalising-pensions-for-the-effect-of-unequal-guaranteed-minimum-pensions/guidance-on-the-use-of-the-guaranteed-minimum-pensions-gmp-conversion-legislation



under

An example of inequalities caused by GMPs

And read forward from this post

https://forums.moneysavingexpert.com/discussion/comment/63111874/#Comment_63111874

to

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

Fernzy

Just to check. Am I protected by Anti Franking legislation. To re-iterate my position:

Preserved benefits on leaving were:

1) Scale pension of £820.27 (inc GMP)
a) 50% spouse’s pension
b) 3% pa compound escalation

2) (Pre-1988) GMP: £225.68
Fixed revaluation of 8.5%

Fernzy

Just to check. Am I protected by the Anti Franking legislation?

To re-iterate preserved pension details:
Preserved benefits on leaving were:

1) Scale pension of £820.27 (inc GMP)
a) 50% spouse’s pension
b) 3% pa compound escalation

2) (Pre-1988) GMP: £225.68
Fixed revaluation of 8.5%

xylophone

Am I protected by Anti Franking legislation. 

 Possibly not. See my post above. Read the whole of the link on Franking very carefully, including the example at the bottom.

You will note

The most widely known example of Full Franking is for members who left their pension scheme prior to 1 January 1985 with some GMP. 

Schemes were permitted to let any increases on the GMP before retirement effectively be absorbed by the non GMP pension. 

For leavers after 31 December 1984, this practice was prohibited by the Anti-Franking legislation; however there are still common scenarios where Full Franking is permitted for post 85 leavers. 

You will note

Early Retirement Style Franking

If a member retires early, then all bets are off as far as anti-franking is concerned. The scheme need only test that GMP is covered at GMP age and the entire excess pension can be franked to provide for this.

i.e. Full Franking of the excess pension is permitted.

Or there may be franking of  the escalation on the excess pension?

Further information here

https://www.gov.uk/guidance/provide-a-pension-for-your-scheme-member#gmp-anti-franking-requirements

I would ask the Administrator for an explanation in writing of the figures you have been given and how they were calculated.

Have you yet obtained a state pension forecast? What exactly does it say?

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

If the deferred pension is the only contracted out scheme of which you have been a member, what is the COPE?

Fernzy

Oops! My bad. Did not switch to page 2 of Forum. Hence duplicate posts! Apologies. 


Also my bad did not mean to say administrator just replied at the weekend but lag in posting as I was writing it on Friday and posted on the forum at the weekend. Sorry again.

On anti franking protection:

I have deferred retirement. Scheme NRD at age 60 was 2016. So early retirement clause for anti franking does not apply. 

Left scheme: Sep-85 (post 01/01/85)

I have a statement which shows that I have a preserved scheme pension greater than the pre-1988 GMP at date of leaving the scheme. Hence my belief and hope that I am protected. 

On COPE: Can’t seem to access the state pension forecast using my gateway id . Says unauthorised for Administrators only.

I will ask the scheme administrator to obtain it for me.

I will also ask the administrator for written explanation of the figures and calculation. Thanks.

xylophone

On COPE: Can’t seem to access the state pension forecast using my gateway id . Says unauthorised for Administrators only.

Have you already reached State Pension Age and (by not claiming your SP) automatically deferred it?

LHW99

Are you using the right site? https://www.gov.uk/check-state-pension

You may need a different Gateway registration, I believe some types don't access all logins (so to speak)

Fernzy

Just to complete the picture. 

I am male 67 yrs old and started receiving my state pension last year after my 66th birthday. The scheme NRD was age 60. But I have deferred taking benefits this far.  

I tried to login to the link kindly provided by xylophone as I had the scheme reference number etc and used my gateway id but it came up with unauthorised and said only for administrators. However, I have now asked the scheme administrator to provide it. Let’s see. 

Thanks xylophone you have given me lots to read - who knew retiring could take up so much time and energy! 

I had other deferred DB preserved pension benefits and have had no issues, but they did not have any pre-1988 GMP hence me labelling this thread pre-1988 GMP fiasco.

Back to the homework set by xylophone. TTFN.

FIREDreamer

Fernzy said:

Please forgive me for the delay responding to the many useful comments. I could not find the thread after I posted my initial comment. Thank you for your replies. 

It is still as clear as mud to me.

Joined the DB scheme in 01-Jul-1980 and left the scheme on 30-Sep-1985.

Preserved benefits on leaving were:

1) Scale pension of £820.27 (inc GMP)
a) 50% spouse’s pension
b) 3% pa compound escalation

2) (Pre-1988) GMP: £225.68
Fixed revaluation of 8.5%

Unclear about 

A) What date does GMP revaluation stop is it old state pension age of 65 or 66?

Does the 1/7% per week increase to GMP apply if retirement deferred to age 67? Is there a .gov link evidencing this?

C) Why do the scheme administrators insist that only the GMP which as at 01-Aug-23 they calculate to be £4,521.82 is payable. No scheme pension shown hence no commutation or escalation, but showing a higher spouse’s pension of 2/3.

@Fernzy

You left before 01/01/1986 so …

(1) there will be revaluation of GMP (£225.68) up to retirement age of 8.5% per annum
(2) there will be no revaluation of the non GMP (£820.27 - £225.68 = £594.59)

As a post 01/01/1985 you are protected by anti franking.

Your pension at age 60 was

594.59 (non GMP) + £225.68 x 1.085^y (Revalued GMP)

where y = the number of 6th Aprils between Sept 1985 and your 60th birthday.

As a male with GMP age of 65, the pension will be increased (if need be) to the revalued GMP at age 65 which is £225.68 x 1.085^(y+5) (Revalued GMP at 65).

After age 65 the GMP increases at 1/7% per week until taken. In payment pre 1988 does not increase in payment.

Any late retirement enhancemement on the non GMP, if any, will be as per scheme rules.

Moving forward to retirement …

The GMP seems to be 225.68 x 1.085^35 = £3,922.24 at age 65

Allow for 1/7% increase for 107 weeks £3,922.24 x (1 + 107/700) = £4,521.78

Round to the next higher multiple of £0.01 per week gives £4,521.92 (10p different to your figure).

They seem to have not counted your non GMP.

Pension at 60 would have been 

594.59 + 225.68 x 1.085^30 = £3,203.64.

As this is less than the GMP at age 65, even with 3% pa increases on the non GMP, the pension at age 65 is increased to £3,922.24 and is wholly GMP.

Can’t help with the 66% spouse pension instead of 50%, perhaps it’s an error?