GMP revaluation at age 65 for men

zagfles

Jacklob said:

Does anyone know why he had such an increase after GMP equalisation, could any mistake have been made?

GMP accrual was faster for women than men, therefore he'd have had a lower GMP than a woman in the same position. It seems most of his pension is GMP so that could make a significant difference, although wouldn't have thought as much as you've seen. Also a woman would have got the GMP at 60.

When did he leave the scheme? How long was he employed there? Did he retire at 60? What was the excess at leaving? 

zagfles

This is worth a read: GMP-franking.pdf (expertpensions.co.uk)

Might explain it if the scheme's NRA was 60 and he took the pension at 60, then he'd fall into category 2 whereas a woman would be category 1, so the GMP wouldn't have been franked at all for a woman, but for a man the excess increases between 60 and 65 could be franked. And given the high inflation of recent years this could be significant. 

Jacklob

Pensionable service May 1989 to December 1992. The NRD was 60 when he took the pension. I don,t have a record of the “excess at leaving”. The GMP at leaving was £283.

GMPEqCommenter

Based on my understanding of GMP equalisation, anti-franking and what's been said about the Scheme benefits I've set out my guess on what's going on below. Note that I have completely ignored State Pensioner Deductions / Bridging Pensions etc.

Before Equalisation

At date of leaving in 1992, the member had Post88 GMP of £284 and an unknown amount of pension in excess of GMP ("XS" for simplicity).

The standard Scheme benefit is to increase the total pension in line with inflation capped at 5% each year. This gives a total pension at retirement of £2,797.

In addition, a minimum would have been applied to the pension at retirement equal to the statutory minimum pension of statutory GMP revals on GMP and statutory higher rate deferred revaluations on XS (inflation capped at 5% p.a. compound, i.e. you do the cap over the total period rather than capping each year's inflation individually). For a male member retiring at age 60, this is before their GMP age, so there is no statutory requirement to give any GMP revals. The statutory minimum is therefore GMP @ Date of Leaving + XS with stat CPI revals to NRD, which is clearly not going to be higher than the Scheme pension, so the Scheme pension is paid.

Once in payment, the Scheme pension will all increase in line with the standard XS increases to age 65 (his GMP age). Once he reaches age 65, a check will be done against the anti-franking minimum. In his circumstances this is similar to the check done at retirement, but this time because he's reached GMP age he's due GMP revaluations. His pension at 65 will therefore be compared to a pension of GMP with GMP revaluations to 65 + XS with stat CPI revals to NRD (still only NRD, not 65, because there is no statutory requirement to give pension increases in payment on pension accrued prior to 6 April 1997). Given that you've said that his GMP at 65 is £2,672 (= 284 x 1.075^31) and his total pension was only £3,303, there's a good chance that the minimum would have bitten (basically you need XS with stat CPI revals to NRD to be higher than 3,303 - 2,672 = 631).

Equalisation - General Principles

There are a few different ways equalisation can be done, but I'm going to treat it as being done on a "ring-fence" approach. Under this approach three different pension streams are calculated:

• The member's standard benefit before equalisation
• The member's benefit accrued between 17 May 1990 and 5 April 1997 based on their true sex
• The benefit that would have accrued between 17 May 1990 and 5 April 1997 if they had been the opposite sex

At retirement, the pension put into payment would then be equal to the member's standard benefit + Maximum (0, Opposite Sex 90-97 Benefit - True Sex 90-97 benefit).

In later years, how the pension is calculated depends on what "Method" is being applied. You've still got GMP so you're obviously not doing GMP conversion; given that, the options are:

• Method B: Pay the higher of the true and opposite sex pensions at all times (i.e. you always do the Member's standard benefit + Maximum (0, Opposite Sex 90-97 Benefit - True Sex 90-97 benefit)
• Method C1: Pay the higher of the true and opposite sex pensions on a cumulative basis (i.e. it's the same as Method B in year 1, but if in year one the true sex pension was £30 higher and then in year two the opposite sex pension was £50 higher, you'd only get an uplift of £20 rather than the £50 uplift you'd get under Method . In practice this method is rarely used, but it's useful as an intermediate step for explaining C2.
  
• Method C2: As Method C1, but you apply interest on past payments when calculating which sex is cumulatively better off.
  

Equalisation - True Sex Pension

The member accrued service between May 1989 to December 1992. Only pension accrued from 17 May 1990 is subject to equalisation. Assuming it accrued at a constant rate, that's about 3 years 7 months of total service and 2 years 7 months service after 17 May 1990. The Post90 pensions at date of leaving would therefore be:

• Total Post90 Pension: Total pension x 2 7/12 / 3 7/12
• Post90 GMP: 284 x 2 7/12 / 3 7/12 = 205
• Post90 XS: Total Post90 Pension - Post90 GMP

The actual proper GMP equalisation splits may have been done differently (probably more accurately) - for example, I've only done a fairly crude months split, and have assumed all the pension accrues at a constant rate (i.e. no service breaks or part time, and no allowance for the fact that GMP accrues in a more complicated fashion).

This would then get revalued up to retirement in the same way as for the original member's pension. In this particular case, I'd expect the pension at retirement to just end up as 2,797 x 2 7/12 / 3 7/12 = 2,016 (but note this won't always be this simple).

This pension will then get XS increases in payment up until age 65. At 65, an anti-franking minimum will be calculated equal to Post90 GMP @ GMPA + Post90 XS at DOL with stat XS revals to 60 ( = 205 x 1.075^31 + Post90 XS at DOL with stat revals to 60).

Equalisation - Opposite Sex Pension

Usually the total pension at date of leaving will stay the same - it's just the GMP and pension in excess of GMP splits which will change. The member left service before age 59, so calculating the opposite sex GMP at date of leaving is fairly simple - you just take the true sex GMP and multiply it by a date-of birth dependent factor (as per page 174 here: https://www.ppf.co.uk/-/media/PPF-Website/Public/Files/file-2018-10/G/gmp_statement_dec12.pdf). In this case the member is 65 in June 2024, which implies they were born in June 1959, so the factor to use is 1.1220.

• Opp Sex Post90 GMP = 205 x 1.1220 = 230
• Opp Sex Post90 XS = Total Post90 Pension - Opp Sex Post90 GMP
  

This pension is then revalued to retirement. From what I understand of the Scheme benefits, the "Scheme" pension will just be the total pension at date of leaving x inflation capped at 5% each year - as the total pension at date of leaving is the same, the total pension at retirement will also be £2,016. However, the statutory minimum pension will be different from the male's - the female GMP age is 60, and the member is retiring at 60, so they get GMP revaluations in the statutory minimum. Their underpin pension will therefore be: 230 x 1.075^26 + Post90 XS at DOL x stat XS revals to 60 = 1,508 + Post90 XS at DOL x stat XS revals to 60. This is probably higher than £2,016, meaning that the 90-97 opposite sex female pension at retirement is this higher amount.

Once in payment the GMP of £1,508 will get GMP pension increases and the rest of the pension will get XS pension increases. Nothing special will happen to the female pension at 65 (as their GMP is already in payment).

Overall Pattern

At retirement at age 60, the female pension is larger than the male pension due to the statutory minimum that bites for the female but not the male. Between 60 and 65, both pensions will increase with pension increases. All male pension is XS whilst female pension is a mixture of XS and GMP; therefore if XS pension increases are higher than GMP increases then the male pension will increase faster than the female pension (narrowing the gap slightly), and vice versa if GMP pension increases are higher. At 65 the male pension will be tested against the male anti-franking minimum at 65 and may need to increase to cover it; the resulting pension may or may not be higher than the female pension. If you only had pension accrued in the 90-97 period, one of several things could happen:

• Male 90-97 pension is lower than female 90-97 pension after 65. The female 90-97 pension continues to be paid.
  
• Male 90-97 pension is higher than female 90-97 pension after 65; Method B applies. The pension switches to being the male 90-97 pension. The member no longer gets any GMP equalisation uplift but the resulting pension is still higher than what it was before 65.
• Male 90-97 pension is higher than female 90-97 pension after 65; Method C2 applies. The pension remains at the female pension level until all of the GMP equalisation uplift previously paid (with interest) has been clawed back. It then increases abruptly to the male pension at some semi-random point.
  

As the member has some Pre90 pension as well as the Post90 element, in practice in this case if there is a step up in the male pension at 65 I'd expect the equalised pension at 65 to increase at least a bit as well, regardless of whether the 90-97 element is higher than the female 90-97 pension or not.

Disclaimer

I have a reasonable understanding of GMP equalisation, but the results of it are always very dependant on the specific benefits and administrative practices of the scheme and the details of the individual member. I've made a number of assumptions, and if these turn out to be wrong it could drastically change the results. Most of the places I've said "I would expect" or "usually", I can construct counter examples if I try hard enough. GMP equalisation uplifts are the difference between two large numbers so can be very "swingy", with big changes in percentage terms for relatively small changes in benefits / assumptions.

I've also not had my figures or explanation checked by anyone.

Jacklob

Thankyou, that is very complicated. My husband turned 65 early June, We haven,t received any correspondence regarding any payment changes so I assume there will be none. I would have expected, however some contact as we have received a letter regarding my husbands Barclays pension, even though nothing changed regarding this.

Jacklob

Can I ask another GMP question. As my husband  is now 65, his Barclays pre 1988 pension is £7314 (i.e the majority) does this mean it will no longer have ANY increases, this seems a bit harsh. His post 1988 is only £899 (max increase 3%)and his excess £1803 (max increase 5%). Pre age 65 for the last 2 years it has ALL increased by 5%.

FIREDreamer

Jacklob said:

Can I ask another GMP question. As my husband  is now 65, his Barclays pre 1988 pension is £7314 (i.e the majority) does this mean it will no longer have ANY increases, this seems a bit harsh. His post 1988 is only £899 (max increase 3%)and his excess £1803 (max increase 5%). Pre age 65 for the last 2 years it has ALL increased by 5%.

Depends on the scheme rules - however the statutory minimum increase on pre 1988 GMP is zero.

xylophone

One would expect the post age 65 notification of pension increase letter  to show

 revalued pre 88 GMP (not increased by the scheme)

revalued post 88 GMP (increased by the scheme  up to 3% CPI)

Excess (increased by the scheme up to 5% RPI)


Presumably your husband was a member of the Barclays 1964 Final Salary Pension Scheme?

Will there be an SPD when he reaches State Pension Age next year?

Presumably this pension was a deferred pension, his having left Barclays to join Lloyds in 1989?

He drew the Barclays pension at NRA of 60?

His GMP has been revaluing at Fixed Rate (7.5%)?

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

Is this relevant to your husband's case?

Jacklob

Yes this  is all correct. I have all the paperwork but none of it mentions a “state pension deduction”. How do I find out if this applies or not? May he not get his full new state pension, as shown on his state pension forecast or is any “state pension deduction” taken from his Barclays pension? 

Edit Just found his original retirement quote, at state pension age his scheme pension will reduce by £330.63. Would this have increased since age 60 or is it just a fixed flat amount?

Jacklob

Unfortunately the link you provided is “beyond my  brain’s capacity”