Pre-1988 GMP fiasco

Fernzy

FIREDreamer said:

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?

Thank you for your reply. Agree with the GMP calculation but unclear about the omission of the non GMP pension. Thanks for the anti-frank check too. I  reached the same conclusion checking each test in turn on the .gov link kindly provided by xylophone.

I received benefit statements for years which ceased in 2010. Statements show an increase of about 3% pa compound. Only one value was shown on the annual statement not split between GMP and scheme (non-GMP). 

As the group I worked for was taken over twice! I guess I cannot rely on the latest scheme booklet as my preserved pension funding basis must have been based in the original scheme rules. New scheme rules for the scheme I have been put into says deferred pensions will be increased. 

It seems to me that legislation has being looking to protect and more recently equalise while making sure no one loses out. 

I have written to the administrator to send me the documentary evidence that supersedes the scheme booklet and provide a written explanation and calculations used. Also, to send me the details they have on me to check accuracy as it has been handed over from administrator to administrator. Asked for a 5 day turnaround as they took 10 weeks for an investigation so must have all the information to hand.

Also, sent details to the Money Helper which has taken over from TPAS via their web form. Turnaround they told me was currently 3 days. 

FIREDreamer

Fernzy said:

FIREDreamer said:

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?

Thank you for your reply. Agree with the GMP calculation but unclear about the omission of the non GMP pension. Thanks for the anti-frank check too. I  reached the same conclusion checking each test in turn on the .gov link kindly provided by xylophone.

I received benefit statements for years which ceased in 2010. Statements show an increase of about 3% pa compound. Only one value was shown on the annual statement not split between GMP and scheme (non-GMP). 

As the group I worked for was taken over twice! I guess I cannot rely on the latest scheme booklet as my preserved pension funding basis must have been based in the original scheme rules. New scheme rules for the scheme I have been put into says deferred pensions will be increased. 

It seems to me that legislation has being looking to protect and more recently equalise while making sure no one loses out. 

I have written to the administrator to send me the documentary evidence that supersedes the scheme booklet and provide a written explanation and calculations used. Also, to send me the details they have on me to check accuracy as it has been handed over from administrator to administrator. Asked for a 5 day turnaround as they took 10 weeks for an investigation so must have all the information to hand.

Also, sent details to the Money Helper which has taken over from TPAS via their web form. Turnaround they told me was currently 3 days. 

I think you lost the non gmp from age 65 as the total pension in payment (from nra of 60 even though it wasnt actually IN payment) had to be uplifted to the revalued gmp at that point as it was lower than the rgmp at age 65. That isnt franking as it was post nra.

I have worked in pensions in the past, so my knowledge may be hazy but i am sure this is fine.

xylophone

started receiving my state pension last year after my 66th birthday.

Then clearly past the point of being able to obtain a state pension forecast!

As a matter of interest, do you have a copy of the Scheme Guide for your section of the scheme?

If so, had you taken the pension at age 60, and given that it appears that notwithstanding that there was no statutory requirement,

https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/

 your scheme did revalue pre 86 excess, would the situation have been as here?

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

Fernzy

xylophone said:

started receiving my state pension last year after my 66th birthday.

Then clearly past the point of being able to obtain a state pension forecast!

As a matter of interest, do you have a copy of the Scheme Guide for your section of the scheme?

If so, had you taken the pension at age 60, and given that it appears that notwithstanding that there was no statutory requirement,

https://www.barnett-waddingham.co.uk/comment-insight/blog/revaluation-for-early-leavers/

 your scheme did revalue pre 86 excess, would the situation have been as here?

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

Hmm! Perhaps I should have requested a copy of the Scheme Trust Deed and Rules from the administrator.

I only have a copy of the original scheme booklet and leaving pension statement plus a quote for a transfer value soon after leaving the firm, then the annual benefits certificates until 2010. They seemed to have stop issuing benefit statements and sent scheme funding notices. 

The scheme I have fallen into seems to have different escalation and spouse’s pension than my original scheme had. Here is the link to the new scheme:

https://www.lloydsbankinggrouppensions.com/scheme_benefits/retirement_benefits
I am in the Lloyds Banking Group Scheme No.2.

I believed that the GMP and non GMP are additive and funded by the scheme accordingly.

The non GMP pension has commutation rights, escalation in payment and a spouse’s pension also with escalation and hence would be valued accordingly and not simply subsumed by the GMP.

The link you kindly shared about Mike’s dilemma shows GMP and non GMP separately which is what I expect and indeed was quoted when I requested a late retirement quote in 2022. They (TW) - same administrator as Mike) say that the 2022 quote was incorrect due to this step up which I am struggling to get my head around.

Is there a link to a precedent that allows the non GMP to be subsumed by the GMP?

hyubh

Fernzy said:

I believed that the GMP and non GMP are additive and funded by the scheme accordingly.

The non GMP pension has commutation rights, escalation in payment and a spouse’s pension also with escalation and hence would be valued accordingly and not simply subsumed by the GMP.

The link you kindly shared about Mike’s dilemma shows GMP and non GMP separately which is what I expect and indeed was quoted when I requested a late retirement quote in 2022. They (TW) - same administrator as Mike) say that the 2022 quote was incorrect due to this step up which I am struggling to get my head around.

Is there a link to a precedent that allows the non GMP to be subsumed by the GMP?

While you may well have a case, I wouldn't put things in those terms. GMP was intended as a sort of underpin which the contracted-out DB pension has to cover - it was only with anti-franking legislation later (plus the requirement to increase post-GMP in payment) that this principle got muddled (and even then, only with private sector DB pensions - GMP still clearly acts as an underpin in public sector DB). So the total pension on exit is calculated first, with the excess ('non-GMP') simply the scheme pension less the GMP. Thereafter, things like commuting for a lump sum, scheme retirement factors, etc., pertain to the whole 'scale' pension, not just the excess, and when applied, the GMP acts as a potential limit on what can be commuted etc.

Fernzy

hyubh said:

Fernzy said:

I believed that the GMP and non GMP are additive and funded by the scheme accordingly.

The non GMP pension has commutation rights, escalation in payment and a spouse’s pension also with escalation and hence would be valued accordingly and not simply subsumed by the GMP.

The link you kindly shared about Mike’s dilemma shows GMP and non GMP separately which is what I expect and indeed was quoted when I requested a late retirement quote in 2022. They (TW) - same administrator as Mike) say that the 2022 quote was incorrect due to this step up which I am struggling to get my head around.

Is there a link to a precedent that allows the non GMP to be subsumed by the GMP?

While you may well have a case, I wouldn't put things in those terms. GMP was intended as a sort of underpin which the contracted-out DB pension has to cover - it was only with anti-franking legislation later (plus the requirement to increase post-GMP in payment) that this principle got muddled (and even then, only with private sector DB pensions - GMP still clearly acts as an underpin in public sector DB). So the total pension on exit is calculated first, with the excess ('non-GMP') simply the scheme pension less the GMP. Thereafter, things like commuting for a lump sum, scheme retirement factors, etc., pertain to the whole 'scale' pension, not just the excess, and when applied, the GMP acts as a potential limit on what can be commuted etc.

Sorry I don’t understand Hyubh how you can calculate the total pension on exit without working the two components separately, GMP and scale pension, and then summing them up. 

The scheme booklet and my statement on leaving showing a transfer value showed two separate elements. Indeed, the scheme booklet refers to each element separately and would have been funded by the scheme separately. 

Do you have a link with a legal definition on this?

Thanks

xylophone

The scheme I have fallen into 

I don't follow - how does a deferred pension "fall into" another scheme?

What was the name of the scheme you were in when you left the employment of the company?

That said, is this of interest?

https://www.pensions-ombudsman.org.uk/sites/default/files/decisions/PO-16468.pdf

hyubh

Fernzy said:

hyubh said:

Fernzy said:

I believed that the GMP and non GMP are additive and funded by the scheme accordingly.

The non GMP pension has commutation rights, escalation in payment and a spouse’s pension also with escalation and hence would be valued accordingly and not simply subsumed by the GMP.

The link you kindly shared about Mike’s dilemma shows GMP and non GMP separately which is what I expect and indeed was quoted when I requested a late retirement quote in 2022. They (TW) - same administrator as Mike) say that the 2022 quote was incorrect due to this step up which I am struggling to get my head around.

Is there a link to a precedent that allows the non GMP to be subsumed by the GMP?

While you may well have a case, I wouldn't put things in those terms. GMP was intended as a sort of underpin which the contracted-out DB pension has to cover - it was only with anti-franking legislation later (plus the requirement to increase post-GMP in payment) that this principle got muddled (and even then, only with private sector DB pensions - GMP still clearly acts as an underpin in public sector DB). So the total pension on exit is calculated first, with the excess ('non-GMP') simply the scheme pension less the GMP. Thereafter, things like commuting for a lump sum, scheme retirement factors, etc., pertain to the whole 'scale' pension, not just the excess, and when applied, the GMP acts as a potential limit on what can be commuted etc.

Sorry I don’t understand Hyubh how you can calculate the total pension on exit without working the two components separately, GMP and scale pension, and then summing them up. 

The scale pension is calculated however the scheme calculates it's pension when the member has left active service (membership), e.g. 1/60 final pensionable salary for each year of service. Separately, a government agency calculates a GMP based on NI contracted-out earnings/contributions and various factors - the scheme could calculate this as well, but the government one is the canonical one.

Generally speaking you would expect the scheme pension at exit to be higher - typically a better accrual rate, more pay being pensionable (remember you don't pay NI on everything), and usually final- rather than average salary based. But regardless, we are talking about two completely separate calculations based on their own definition of 'pensionable' pay, accrual rate, etc. Rather than as a native component of the scheme pension, then, the GMP calculation is to ensure the member, by contracting out with the occupational scheme and so forgoing additional state pension (SERPS), hasn't lost out. (Or so was the original idea - the government would still calculate a SERPS for you, then at state pension age, subtract any GMP you had acquired.)

Fernzy

xylophone said:

The scheme I have fallen into 

I don't follow - how does a deferred pension "fall into" another scheme?

What was the name of the scheme you were in when you left the employment of the company?

That said, is this of interest?

https://www.pensions-ombudsman.org.uk/sites/default/files/decisions/PO-16468.pdf

Hill Samuel Group (HSG) member, then TSB by virtue of takeover, now Lloyds Banking Group by virtue of another takeover.

Hill Samuel Group Scheme was a generous 1/45th accrual scheme with escalation at 3% on 75% of pension and spouses pension of 50%. Early and late retirement permitted.

On late retirement HSG scheme booklet states that pension will be increased for each complete month between Normal Pension Date (age 60) and the date you actually retire. 

GMP would be revalued at 1/7% for each week between State Pension Age and the date you actually retire. 

Lloyds Pension Scheme No. 2 link in previous post says same on scheme pension but increased I think by 5%. It has 5% escalation and 2/3 spouse’s pension. 

Sorry for the confusion.

Furthermore last year I requested a Late Retirement quote for retiring on 09-Jun-2022 (after discussion with scheme administrators who told me it would revalued using late retirement factors for the future date chosen, I decided to defer for a further period ie now on 01-Aug-23):

2022 quote as follows:
Option 1: 

Pre-1988 GMP: £4,191.20 pa

Scheme Pension before 06-Apr-1997: £2,077.07

Option 2:

Tax Free Cash Sum: £30,471.35

Pre-1988 GMP: £4,191.20 pa

Scheme Pension before 06-Apr-1997: £379.50

Requested Late Retirement quote for retiring on 01-Aug-23:

Option 1:

Pre-1988 GMP: £4,521.92 pa

Option 2:

Transfer Alternative.

Spouse's pension at the date of your retirement is £3,014.61 a year regardless of the option you have chosen.

Queried omission of scheme pension in the 01-Aug-23 retirement quote with the Scheme Administrators (Willis Towers Watson) and received the following cryptic remark "...The step-up at age 65 does not apply to members retiring late in the Hill Samuel pension scheme, and therefore the previous quote of June 2022 that you refer to below was incorrect...".

xylophone

I am not surprised that you are confused - why is HSG Scheme being cited if you have "fallen into" Lloyds 2?

And to which Scheme does the calculation of the spouse pension ( £3,014.61 ) relate?  You mentioned 66% (2/3)  previously but 66% of what?

Since retiring any time after age 60 would have been a late retirement in terms of the Scheme Rules (whether HSG or Lloyds), and since both appear to have offered late retirement increases, what has happened to yours?

Have you asked WTW how the calculations would have been done had you retired at NRA and on which Scheme Rules/statutory provisions this would have been based?