SERPS and Contracting out

worn_out

Thanks all for your great comments and insights...very much appreciated...

I know I was one of the lucky ones with a defined benefits pension, and fortunate that I happen to swap employers in 1988 and ended up with deferred benefits for my GMP fixed at 8.5% a year..which I actually let Norwich Union have a go to see if they could do any better (!) ..under advice. albeit in payment this sum receives no annual increases until such time as the serps catches up with it...which it never will unless I live to 100..... but in addition because this is aggregated to the post 88 GMP element (the subject of this topic) this may help the serps element catch up sooner, depending on inflation.

What would help, of course, albeit it might be a mute point now inflation is back to 2%, is if the pension funds were allowed (or volunteered) to pay CPI on post 88 GMP....particularly as this is falling further and further behind the serps equivalent...the 3% was set by the Govt way back in the 70's (I think) and has no logic other than to help employers pension funds afford the responsibility  for the serps element...

Anyway, enough.....and thanks again guys..

xylophone

What would help, of course, albeit it might be a mute point now inflation is back to 2%, is if the pension funds were allowed (or volunteered) to pay CPI on post 88 GMP....particularly as this is falling further and further behind the serps equivalent...the 3% was set by the Govt way back in the 70's (I think) and has no logic other than to help employers pension funds afford the responsibility  for the serps element...

I don't think you understand the situation despite several explanations.

Schemes are obliged  to pay up to 3% CPI (used to be RPI) on post 88 GMP.

Try here

https://forums.moneysavingexpert.com/discussion/comment/62892305/#Comment_62892305 and check links therein.

Marcon

worn_out said:

What would help, of course, albeit it might be a mute point now inflation is back to 2%, is if the pension funds were allowed (or volunteered) to pay CPI on post 88 GMP....particularly as this is falling further and further behind the serps equivalent...the 3% was set by the Govt way back in the 70's (I think) and has no logic other than to help employers pension funds afford the responsibility  for the serps element...

Anyway, enough.....and thanks again guys..

The requirements for schemes to pay increases of up to 3% on post-88 GMP were introduced in 1988. Until then the state would provide all increases on the GMP element of pension (once the member reached State Pension Age) accrued from 1978 until April 1988, with such increases being paid alongside the state pension.

Virtually all pension schemes have documentation which permits augmentations and/or discretionary increases (the two are slightly different), so the issue isn't what they are 'allowed to do'. It's the cost of doing anything over and above the promises made to members. Paying more to pensioners has a knock-on impact on the security of benefits for all members, especially where the 'extra benefit' has a cumulative effect. 

worn_out

xylophone said:

What would help, of course, albeit it might be a mute point now inflation is back to 2%, is if the pension funds were allowed (or volunteered) to pay CPI on post 88 GMP....particularly as this is falling further and further behind the serps equivalent...the 3% was set by the Govt way back in the 70's (I think) and has no logic other than to help employers pension funds afford the responsibility  for the serps element...

I don't think you understand the situation despite several explanations.

Schemes are obliged  to pay up to 3% CPI (used to be RPI) on post 88 GMP.

Try here

https://forums.moneysavingexpert.com/discussion/comment/62892305/#Comment_62892305 and check links therein.

Don't know how you think that, I've always known post 88 pays 3%

worn_out

Marcon said:

worn_out said:

What would help, of course, albeit it might be a mute point now inflation is back to 2%, is if the pension funds were allowed (or volunteered) to pay CPI on post 88 GMP....particularly as this is falling further and further behind the serps equivalent...the 3% was set by the Govt way back in the 70's (I think) and has no logic other than to help employers pension funds afford the responsibility  for the serps element...

Anyway, enough.....and thanks again guys..

The requirements for schemes to pay increases of up to 3% on post-88 GMP were introduced in 1988. Until then the state would provide all increases on the GMP element of pension (once the member reached State Pension Age) accrued from 1978 until April 1988, with such increases being paid alongside the state pension.

Virtually all pension schemes have documentation which permits augmentations and/or discretionary increases (the two are slightly different), so the issue isn't what they are 'allowed to do'. It's the cost of doing anything over and above the promises made to members. Paying more to pensioners has a knock-on impact on the security of benefits for all members, especially where the 'extra benefit' has a cumulative effect. 

Yes I know, but as I've said, in context it's a very small amount compared to the full pension....

xylophone

Don't know how you think that, I've always known post 88 pays 3%

Up to 3% (RPI/CPI).

But you do not seem to have grasped that this was only part of a design which centred round the relationship between

state/occupational pension provision/statutory obligation.

The state had already reneged on the deal to pay increases on the whole of the ASP when the "up to 3%" was introduced in 1988.

You would hardly expect the occupational schemes to volunteer to take more pain?

You could argue that the Government should not have permitted the Schemes to have the option of  Fixed Rate/Limited Rate indexation

rather than Full Rate when a DB pension became deferred.

You feel that you have room for complaint on your situation as a state pensioner on the old scheme.

But what of those who reached SPA just after 6.4.16 ? 

https://www.ombudsman.org.uk/making-complaint/what-we-can-and-cant-help/how-we-have-helped-others/communication-changes-inflation-state-pensions

And being advised that you are going to be hung out to dry doesn't lessen  the effect thereof....

Never trust the Government on pensions?