Pre-1988 GMP fiasco

Fernzy

hyubh said:

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.)

I left the scheme in 1985 and had a preserved pension made up as follows:

Date of joining scheme: 01-Jul-1980

Date of leaving scheme: 30-Sep-1985

Preserved Benefits:

Scale pension (inc. GMP) at exit: £820.27

GMP at exit to be revalued at 8.5%: £225.68 p.a.

I still don’t understand why the two components are not calculated separately and added to give a final pension. This would have been included in the actuarial funding hence factored in. 

hyubh

Fernzy said:

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.

Not the main thing, but have you just passed 67? If not, I make that GMP figure slightly short, given it was £225.68 at exit on 30/09/1985...?

Fernzy

xylophone said:

I am not surprised that you are confused - why is HSG Scheme being cited if you have "fallen into" Lloyds 2? I have asked WTW for documents scanned or copied & pasted verbatim to check on the age 65 step-up issue for HSG only. Lloyds 2 seems to offer better benefits than HSG as per link but I don’t think I would be entitled to these.

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? This figure relates to 2/3rds of the all GMP 2023 quote of £4,521.92. In the 2022 quote to me from WTW the spouse’s pension was £4,178.85 regardless of taking TFCS or not this was based on 2/3 of total of pre-1988 GMP of £4,191.20 plus scheme pension of £2,077.07.

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? WTW say 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  was incorrect,

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? I assume you mean age 65 to clarify as I started to take my state pension at age 66 (new NRA). Another item I am confused about. Either way I have not asked them this but will remember to include this in the my next reply to them,

See my comments in bold inline - now really getting to grips with using the forums. Thanks.

Fernzy

hyubh said:

Fernzy said:

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.

Not the main thing, but have you just passed 67? If not, I make that GMP figure slightly short, given it was £225.68 at exit on 30/09/1985...?

Thanks for checking the figures. Yes I am 67. Born in July 1956. What do you make the GMP figure. I calculated to 01-Aug-23 that it should be £4825.65 using 8.5% from 30/09/85 to 09/07/21 (old SPA) then the 1/7% pw from 10/07/21 to 31/07/23. 

xylophone

Have you asked WTW how the calculations would have been done had you retired at NRA 

I should have said Scheme NRA. At one time it was quite common for this to be age 60  in occupational schemes for both men and women, notwithstanding the fact that SPA was later for men.

It was 60 in both schemes?

With regard to State Pension Age, for some years now this has not aligned with GMP age which remains at 60 (F) and 65 (M).

hyubh

Fernzy said:

hyubh said:

Fernzy said:

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.

Not the main thing, but have you just passed 67? If not, I make that GMP figure slightly short, given it was £225.68 at exit on 30/09/1985...?

Thanks for checking the figures. Yes I am 67. Born in July 1956. What do you make the GMP figure. I calculated to 01-Aug-23 that it should be £4825.65 using 8.5% from 30/09/85 to 09/07/21 (old SPA) then the 1/7% pw from 10/07/21 to 31/07/23. 

Ah, OK. In that case I come up with the exact same GMP figure as WTW do for a retirement date of 01/08/22 (i.e. £4,521.92 pa) -

• GMP at exit is divided by 52, since GMPs strictly speaking are calculated as weekly values (in the state pension '4 week month' sense of 'weekly')
• Multiply by the revaluation factor of 17.3796 (the final 6th April isn't counted); this gets a figure of £75.43 pw at GPD (i.e. old state pension date)
• Multiply by a GMP late retirement factor of 1.5285 (this is just statutory by the way, the scheme has no choice but to apply the 1/7% pw)
• Finally, multiply by 52 to scale back up to annual

Ultimately I think the question to WTW is basically what you started with: 'why have you franked the whole excess away, rather than just the excess increases in payment? Your previous reference to a step up not being applicable is confusing, since that does not explain why there is no excess at all any more'.

Fernzy

Just had a reply from Money Helper within 3 days as per phone call. Impressive. 

Reply: 

MoneyHelper, does not have a 'pension dispute' function, and therefore we cannot help people to try and resolve pension issues/pension disputes between individuals/pension schemes/employers. 

 

Your pension benefits should be calculated in accordance with the Trust Deed and Rules that govern the pension arrangement. 

 

Therefore your pension benefits should have been calculated in accordance with the Trust Deed and Rules in place at the date you left the scheme. 

 

You should at that time, have been issued with a 'leaving statement' showing your entitlement in the scheme at the date of leaving, within 3 months of the scheme administrators being informed that you had left employment and/or left the scheme. 

 

The GMP at the date of leaving needs to be increased to comply with social security legislation between date of leaving and GMP Age (which is 65 for men) depending on the method of revaluation agreed between the trustees of the pension scheme and the Government - which should be reflected in the Trust Deed and Rules.

 

GMP Revaluation between date of leaving and GMP Age (60 for women and 65 for men)

 

The methods of revaluation of GMP  that were available to be agreed between the trustees and the Government  were at that time, either;

 

(i) Fixed Rate Revaluation; or

(ii) Section 148 orders; or

(iii) Limited Rate Revaluation - which ceased from 6 April 1997. 

 

If you did leave the scheme on 30 September 1985, and the scheme was 'contracted-out' of the State Earnings Pension Scheme' or SERPS, then all the GMP should be classed as what is known as Pre-88 GMP, because it was earned during pensionable service up to 5 April 1988. 

 

Secondly, under the law, that part of your pension benefits that represent your Pre-88 GMP, does not have to be increased by the scheme once the pension is in payment. 

 

GMP if benefits are taken after you reach GMP Age (60 for women, 65 for men)

 

Now if you have not already claimed your pension and it is not in payment when you reach GMP Age, because you have postponed taking your whole pension then to comply with social security legislation the Revalued GMP as at GMP Age (for you this is Age 65), is subject to what is known as GMP incrementation and this will be calculated based on the number of weeks between age 65 and when your actual pension benefits are put in payment. 

 

You should ask for an explanation in writing from the trustees of the scheme, via the scheme administrators for how the pension benefits were calculated including GMP shown in the figures given to you both in the retirement quote of 9 June 2022 and 1 August 2023, and you can ask if they can ask the 'scheme actuary' as an independent person to verify the calculations and that they are both in accordance with the Trust Deed and Rules in place at the time of leaving, and any subsequent changes in the rules and social security legislation.

 

As I have said above, our remit is that we no longer have a 'pensions dispute' function, if you are unhappy with the written response from the truste3es of the pension scheme, then you can contact a free and impartial Government service called The Pensions Ombudsman (TPO).

 

The remit of The Pensions Ombudsman (TPO) is to help resolves pension issues/pension disputes between individuals/pension schemes/employers. They have an informal dispute process - called the Early Resolution Service (ERS). More information on the ERS can be found at the following link;

https://www.pensions-ombudsman.org.uk/sites/default/files/publication/files/Early%20Resolution%20Service%20March%202022.pdf

 

Alternatively, you can invoke the trustees complaint process - known as the Internal Dispute Resolution Procedure (IDRP). All occupational pension schemes are required to have an IDRP process in place, and it can be either an one-stage process, or a two-stage process. 

 

The ERS may help you go through the IDRP process of an occupational pension scheme. Once the IDRP process is complete, if you are still not happy, you can apply to The Pensions Ombudsman (TPO) to go through the formal dispute process. 

 

Please note by law, there is a time limit by which The Pensions Ombudsman (TPO) can deal with a formal dispute and this is 3 years from when the issue you are complaining about occurred, or 3 years for when you should have been aware of the issue that you are complaining about. 

 

Therefore i suggest that you contact The Pensions Ombudsman (TPO) if you want to seek further help. If contacting them by telephone, when you call, you need to select option 1 to talk to a member of their staff. 

 

The contact details for The Pensions Ombudsman (TPO) can be found at the following link;

https://www.pensions-ombudsman.org.uk/contact-us

 

I trust that this information will prove helpful. Should you require any further assistance feel free to reply to this e-mail or call our helpline on 0800 011 3797

hyubh

Fernzy said:

Just had a reply from Money Helper within 3 days as per phone call. Impressive. 

Reply: 

MoneyHelper, does not have a 'pension dispute' function, and therefore we cannot help people to try and resolve pension issues/pension disputes between individuals/pension schemes/employers. 

 

Your pension benefits should be calculated in accordance with the Trust Deed and Rules that govern the pension arrangement. 

 

Therefore your pension benefits should have been calculated in accordance with the Trust Deed and Rules in place at the date you left the scheme. 

 

You should at that time, have been issued with a 'leaving statement' showing your entitlement in the scheme at the date of leaving, within 3 months of the scheme administrators being informed that you had left employment and/or left the scheme. 

 

The GMP at the date of leaving needs to be increased to comply with social security legislation between date of leaving and GMP Age (which is 65 for men) depending on the method of revaluation agreed between the trustees of the pension scheme and the Government - which should be reflected in the Trust Deed and Rules.

 

GMP Revaluation between date of leaving and GMP Age (60 for women and 65 for men)

 

The methods of revaluation of GMP  that were available to be agreed between the trustees and the Government  were at that time, either;

 

(i) Fixed Rate Revaluation; or

(ii) Section 148 orders; or

(iii) Limited Rate Revaluation - which ceased from 6 April 1997. 

 

If you did leave the scheme on 30 September 1985, and the scheme was 'contracted-out' of the State Earnings Pension Scheme' or SERPS, then all the GMP should be classed as what is known as Pre-88 GMP, because it was earned during pensionable service up to 5 April 1988. 

 

Secondly, under the law, that part of your pension benefits that represent your Pre-88 GMP, does not have to be increased by the scheme once the pension is in payment. 

 

GMP if benefits are taken after you reach GMP Age (60 for women, 65 for men)

 

Now if you have not already claimed your pension and it is not in payment when you reach GMP Age, because you have postponed taking your whole pension then to comply with social security legislation the Revalued GMP as at GMP Age (for you this is Age 65), is subject to what is known as GMP incrementation and this will be calculated based on the number of weeks between age 65 and when your actual pension benefits are put in payment. 

 

You should ask for an explanation in writing from the trustees of the scheme, via the scheme administrators for how the pension benefits were calculated including GMP shown in the figures given to you both in the retirement quote of 9 June 2022 and 1 August 2023, and you can ask if they can ask the 'scheme actuary' as an independent person to verify the calculations and that they are both in accordance with the Trust Deed and Rules in place at the time of leaving, and any subsequent changes in the rules and social security legislation.

 

As I have said above, our remit is that we no longer have a 'pensions dispute' function, if you are unhappy with the written response from the truste3es of the pension scheme, then you can contact a free and impartial Government service called The Pensions Ombudsman (TPO).

 

The remit of The Pensions Ombudsman (TPO) is to help resolves pension issues/pension disputes between individuals/pension schemes/employers. They have an informal dispute process - called the Early Resolution Service (ERS). More information on the ERS can be found at the following link;

https://www.pensions-ombudsman.org.uk/sites/default/files/publication/files/Early%20Resolution%20Service%20March%202022.pdf

 

Alternatively, you can invoke the trustees complaint process - known as the Internal Dispute Resolution Procedure (IDRP). All occupational pension schemes are required to have an IDRP process in place, and it can be either an one-stage process, or a two-stage process. 

 

The ERS may help you go through the IDRP process of an occupational pension scheme. Once the IDRP process is complete, if you are still not happy, you can apply to The Pensions Ombudsman (TPO) to go through the formal dispute process. 

 

Please note by law, there is a time limit by which The Pensions Ombudsman (TPO) can deal with a formal dispute and this is 3 years from when the issue you are complaining about occurred, or 3 years for when you should have been aware of the issue that you are complaining about. 

 

Therefore i suggest that you contact The Pensions Ombudsman (TPO) if you want to seek further help. If contacting them by telephone, when you call, you need to select option 1 to talk to a member of their staff. 

 

The contact details for The Pensions Ombudsman (TPO) can be found at the following link;

https://www.pensions-ombudsman.org.uk/contact-us

 

I trust that this information will prove helpful. Should you require any further assistance feel free to reply to this e-mail or call our helpline on 0800 011 3797

OK, efficient and all true, but generic and nothing actually new... (You already know the GMP is all pre-88, revaluing at fixed rate, and with a late retirement increment for not coming into payment on or before your GMP age of 65.)

Fernzy

OK, efficient and all true, but generic and nothing actually new... (You already know the GMP is all pre-88, revaluing at fixed rate, and with a late retirement increment for not coming into payment on or before your GMP age of 65.)

This is true. However, the next steps sound interesting. Some I did not know about. 

Next steps:

1. Ask for independent check by Scheme Actuary of both the Jun-22  and the Aug-23 quotes. I did not know about this.

2. If dissatisfied, see if the ERS will take the case and help with IDRP. I did not know about the ERS either.

3. If dissatisfied with IDRP escalate to the Pensions Ombudsman.

Though, I would add a step before 1. Call it 1a and ask to see the Scheme Trust Deed and Rules with any amendments relevant to HSG members which I have done.

If still dissatisfied with 1 to 3 above decisions after referencing scheme rules and legislation myself, possibly take it to court to test any grey areas if open to subjective interpretation.

Fernzy

xylophone said:

I should have said Scheme NRA. At one time it was quite common for this to be age 60  in occupational schemes for both men and women, notwithstanding the fact that SPA was later for men.

It was 60 in both schemes?

With regard to State Pension Age, for some years now this has not aligned with GMP age which remains at 60 (F) and 65 (M).

I did get a retirement quote at NRD in 2016 from the scheme administrator Equiniti at the time. The Scheme Pension was £1,548 pa and spouse’s pension was £1,032.09 pa. Paperwork from Equiniti did not mention of pre-88 GMP that this would be paid from SPA or the windows GMP component and no mention of escalation in payment at all. Scheme booklet is clear on the escalation. 

From your previous comment on why the reference to HSG booklet am I to assume as I have been “transferred” (using the term carefully) to the Lloyds 2  these are the only “rules” I should be looking at. So RPI, max 5% for deferment, 2/3 spouse’s pension and RPI, max 5% escalation in payment. This is more generous than the HSG scheme.