Statutory revaluation query

joowho

I would be hugely grateful for some help in understanding, in simple terms, how statutory revaluation works.  

If my date of deferral/leaving was 31/03/2005, should statutory revaluation currently be based on 18 years increasing to 19 years after 31/03/2024?  Or is it 17 years as per the administrators calculations (see below)?

The reason I ask is that in late 2023 I was provided with a formal written 'estimate of retirement benefits'. This was issued by the administrators due to the fact that I had raised a query as to why the value of my benefits recorded in their online portal had recently decreased.  According to the administrators, the calculation was "based on statutory revaluation based on the number of complete years (18) from your date of leaving to the date of calculation less 1 year (17) so that the estimate of benefits is not overquoted". The revaluation factor used was 1.585 (17 years 01/01/06-31/12/22 based on 2022 revaluation order).

My latest online estimate, from 01/01/2024, has been recalculated using the 2023 revaluation order but is still based on 17 years, ie 01/01/07(!)-31/12/23, using a factor of 1.633.

Why, when statutory revaluation is based on complete years, would there be a need to reduce the number of years' revaluation by one year?  All my previous retirement estimates had been based on complete year revaluations with no reduction, hence the reason why my estimated benefits decreased when the number of years calculation was revised.  Communication with the administrators is slow and I have not yet been able to clarify whether previous calculations were incorrect, and this latest calculation is now indeed correct, although the two letters I have received seem to suggest that the calculation is correct.

If I were to defer my retirement date until 31/03/25 would this achieve a further year revaluation (and would this then be counted as 19 or 20 years for revaluation purposes)?  My NRD is 2025, but prior to the anniversary of my date of leaving.

The pension is also subject to abatement, "subject to statutory revaluation from date of leaving until retirement date", so would I be correct to assume that the figure given at date of leaving should be revalued based on the same number of years/revaluation factor that is used to calculate my pension?

Thank you.

xylophone

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

might help.

Is there a GMP?

The pension is also subject to abatement,

Is this one of the public service schemes?

joowho

Thank you for the link.  This seems to confirm my understanding of 'complete years' so I will need to ascertain why the calculation now deducts a (complete) year so as not to 'overquote' benefits?!

GMP has recently undergone conversion, but is currently worth less than the fixed rate revaluation figure given in earlier quotes.  It's a private sector scheme.

Tommyjw

joowho said:

If my date of deferral/leaving was 31/03/2005, should statutory revaluation currently be based on 18 years increasing to 19 years after 31/03/2024?  Or is it 17 years as per the administrators calculations (see below)?

The reason I ask is that in late 2023 I was provided with a formal written 'estimate of retirement benefits'. This was issued by the administrators due to the fact that I had raised a query as to why the value of my benefits recorded in their online portal had recently decreased.  According to the administrators, the calculation was "based on statutory revaluation based on the number of complete years (18) from your date of leaving to the date of calculation less 1 year (17) so that the estimate of benefits is not overquoted". The revaluation factor used was 1.585 (17 years 01/01/06-31/12/22 based on 2022 revaluation order).

My latest online estimate, from 01/01/2024, has been recalculated using the 2023 revaluation order but is still based on 17 years, ie 01/01/07(!)-31/12/23, using a factor of 1.633.

Why, when statutory revaluation is based on complete years, would there be a need to reduce the number of years' revaluation by one year?  All my previous retirement estimates had been based on complete year revaluations with no reduction, hence the reason why my estimated benefits decreased when the number of years calculation was revised.  Communication with the administrators is slow and I have not yet been able to clarify whether previous calculations were incorrect, and this latest calculation is now indeed correct, although the two letters I have received seem to suggest that the calculation is correct.

If I were to defer my retirement date until 31/03/25 would this achieve a further year revaluation (and would this then be counted as 19 or 20 years for revaluation purposes)?  My NRD is 2025, but prior to the anniversary of my date of leaving.

I mean its a Friday evening so do bear with me but ..

Calculation in 2024:

31/03/2005 -> now is 18 complete years, the revaluation that should be using is 1.691 , not 1.633 for 17 years, because you now factually know every exact increase order to apply and you know it is 18 years.

I can only assume their tool/online estmate you get is flawed or just not updated fully.

Calculation in 2023:

The above and same example retirement date of today but calculated in 2023, when you didnt know what revaluation rate to apply for 2024, looks like:

• 18 total complete years, this of course doesn't change.
• You work backwards so you first look at what retirement date are we looking at, and how many of those years between then and now do we not know the rate for (e.g., every future calender year)
• So we 'don't know' 2024s revaluation, we dont know 1 year.
• Thats mean you 'know' 17 years as that is whats left, and so you use 17 years at the knowns orders which was 1.585 of the ones known in 2023.

So this bit agrees, i think their explanation may have confused it. The way the calculation works as above means you have to base it firstly on how many unknown future years, whats left is then the known years which you use as the basis for the orders to use. 

What may normally happen (which explains their bit about saying not want to over-quote) is a Scheme would have an agreed basis for assuming future years. E.g. 2.5% which is very common. So it would have looked like for a lot of my Schemes:

1. Calc in 2023: 17 years known of 2022 orders (1.585) x 1 year assumed (1.025) = 1.624
2. Calc in 2024: 18 years known of 2023 orders = 1.691

Real inflation of course impacts how good that assumption is, especially the more years you assume, but i understand why some Trustees dont do it at all so they can under-quote people... so long as thats explained which it isnt always.

So ye, 2024 calcs definitely wrong.

xylophone

Could you clarify under what circumstances the pension is abated?

Do you mean clawback/integration rather than abatement?

https://commonslibrary.parliament.uk/research-briefings/sn01121/

joowho

xylophone said:

Could you clarify under what circumstances the pension is abated?

Do you mean clawback/integration rather than abatement?

https://commonslibrary.parliament.uk/research-briefings/sn01121/

Sorry, yes clawback/integration.  

joowho

Tommyjw said:

joowho said:

If my date of deferral/leaving was 31/03/2005, should statutory revaluation currently be based on 18 years increasing to 19 years after 31/03/2024?  Or is it 17 years as per the administrators calculations (see below)?

The reason I ask is that in late 2023 I was provided with a formal written 'estimate of retirement benefits'. This was issued by the administrators due to the fact that I had raised a query as to why the value of my benefits recorded in their online portal had recently decreased.  According to the administrators, the calculation was "based on statutory revaluation based on the number of complete years (18) from your date of leaving to the date of calculation less 1 year (17) so that the estimate of benefits is not overquoted". The revaluation factor used was 1.585 (17 years 01/01/06-31/12/22 based on 2022 revaluation order).

My latest online estimate, from 01/01/2024, has been recalculated using the 2023 revaluation order but is still based on 17 years, ie 01/01/07(!)-31/12/23, using a factor of 1.633.

Why, when statutory revaluation is based on complete years, would there be a need to reduce the number of years' revaluation by one year?  All my previous retirement estimates had been based on complete year revaluations with no reduction, hence the reason why my estimated benefits decreased when the number of years calculation was revised.  Communication with the administrators is slow and I have not yet been able to clarify whether previous calculations were incorrect, and this latest calculation is now indeed correct, although the two letters I have received seem to suggest that the calculation is correct.

If I were to defer my retirement date until 31/03/25 would this achieve a further year revaluation (and would this then be counted as 19 or 20 years for revaluation purposes)?  My NRD is 2025, but prior to the anniversary of my date of leaving.

I mean its a Friday evening so do bear with me but ..

Calculation in 2024:

31/03/2005 -> now is 18 complete years, the revaluation that should be using is 1.691 , not 1.633 for 17 years, because you now factually know every exact increase order to apply and you know it is 18 years.

I can only assume their tool/online estmate you get is flawed or just not updated fully.

Calculation in 2023:

The above and same example retirement date of today but calculated in 2023, when you didnt know what revaluation rate to apply for 2024, looks like:

• 18 total complete years, this of course doesn't change.
• You work backwards so you first look at what retirement date are we looking at, and how many of those years between then and now do we not know the rate for (e.g., every future calender year)
• So we 'don't know' 2024s revaluation, we dont know 1 year.
• Thats mean you 'know' 17 years as that is whats left, and so you use 17 years at the knowns orders which was 1.585 of the ones known in 2023.

So this bit agrees, i think their explanation may have confused it. The way the calculation works as above means you have to base it firstly on how many unknown future years, whats left is then the known years which you use as the basis for the orders to use. 

What may normally happen (which explains their bit about saying not want to over-quote) is a Scheme would have an agreed basis for assuming future years. E.g. 2.5% which is very common. So it would have looked like for a lot of my Schemes:

1. Calc in 2023: 17 years known of 2022 orders (1.585) x 1 year assumed (1.025) = 1.624
2. Calc in 2024: 18 years known of 2023 orders = 1.691

Real inflation of course impacts how good that assumption is, especially the more years you assume, but i understand why some Trustees dont do it at all so they can under-quote people... so long as thats explained which it isnt always.

So ye, 2024 calcs definitely wrong.

Thanks for your detailed reply.  

I had an online quote on 06/04/23 for pension taken at NRD, in which the calculation was GMP 19 years x fixed rate revaluation (4.5%), plus excess 18 years @ 1.628 (01/01/05-31/12/22, 2022 revaluation table).  I was aware there would be a further year revaluation in 2024.

In October 2023 I noticed the value of my online quote had decreased and queried this with the administrators.  They sent me a written formal estimate of benefits (same value as the online portal) and confirmed that the calculation was now the converted GMP value plus excess and was now based on 17 years @ 1.585 (01/01/06-31/12/22, 2022 revaluation table).  No '1 year assumed' as per your example

My latest quote as at January 2024 is now calculated as converted GMP value plus excess:  17 years @ 1.633 (01/01/07-31/12/23, 2023 revaluation table).  

As there have been so many changes to the scheme rules over the years, I have simply been trying to gauge  the amount due at NRD early next year or, as mentioned in my OP, whether deferring until after 31/03/25 (anniversary of my date of leaving) would be a good idea.  

I had thought the calculations would be based on 19 years revaluation (or 20 if after 31/03/25), but it appears that the administrators will now be basing their calculations to NRD on 18 years?