Confused about GMP and reduction in pension increase this year

Maz1963

Hi everyone. I am receiving payment of a pension from my previous employer, a company which has recently passed the admin of its pension scheme to the dreaded Mercer.  My increase this year seemed short, and the different elements of the pension, and increases applied to it, were presented differently. So I queried all of this with Mercer and after weeks of waiting, received a one liner response which didn't help much. What they did say was that the change was due to me reaching my GMP age of 60 (which was actually last June).  I have read loads on line about this and I kind of understand that something changes when you reach 60 (as a woman), but I don't really fully get it. I have put the query back into them (not raising my hopes of a satisfactory answer this time!), but wondered if this has happened to any other ladies around 60 and whether it's correct. It may well be, but I wish they would explain it to me! I don't particularly want to fork out for a financial adviser to explain this to me as the amount in question is not huge.

Does this GMP issue/element mean a reduction in pension increases when you reach 60?  I don't remember anything in my pension forecast warning me of this. Are there any guides on line that anyone can recommend to help understand this? Many thanks.

molerat

Does this GMP issue/element mean a reduction in pension increases when you reach 60?

Often yes.  Pre 60 (65 for men) the whole pension increases in line with the scheme rules.  Once GMP age is reached the pension is split and different portions receive different increases.

The mineworkers pension has a pretty good info sheet https://www.mps-pension.org.uk/media/wkpntb04/gmp-factsheet.pdf

xylophone

 Up to 5/4/16, most defined benefit  occupational pension schemes  contracted out of the state earnings related pension scheme

(SERPS) /State second pension (S2P). 

If you were the member of such a scheme, you and your employer paid a lower rate of National Insurance.

Between 6/4/78 and  5/4/97, such a scheme had to guarantee to pay members a pension that was at least as great as they would

have received had they  remained contracted in to the State additional pension.

This was the Guaranteed Minimum Pension which was payable from age 60 (F) or 65 (M).


GMP age used to align with State PensIon Age but no longer does. 

When the pensioner of such a scheme reaches GMP age, he/she is likely to receive a pension increase statement that shows the

pension split out into its component parts as follows.

Pre 88 GMP

Post 88 GMP

Excess over GMP.


The scheme has no obligation to pay any increase on pre 88 GMP.

It must pay up to 3% (depending on inflation) on post 88 GMP.

The excess increases under scheme rules.

The above explains what has happened to your pension increase.

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Maz1963

molerat said:

Does this GMP issue/element mean a reduction in pension increases when you reach 60?

Often yes.  Pre 60 (65 for men) the whole pension increases in line with the scheme rules.  Once GMP age is reached the pension is split and different portions receive different increases.

The mineworkers pension has a pretty good info sheet https://www.mps-pension.org.uk/media/wkpntb04/gmp-factsheet.pdf

Thanks, your brief explanation is far more helpful than what Mercer gave me!

Maz1963

xylophone said:

 Up to 5/4/16, most defined benefit  occupational pension schemes  contracted out of the state earnings related pension scheme

(SERPS) /State second pension (S2P). 

If you were the member of such a scheme, you and your employer paid a lower rate of National Insurance.

Between 6/4/78 and  5/4/97, such a scheme had to guarantee to pay members a pension that was at least as great as they would

have received had they  remained contracted in to the State additional pension.

This was the Guaranteed Minimum Pension which was payable from age 60 (F) or 65 (M).


GMP age used to align with State PensIon Age but no longer does. 

When the pensioner of such a scheme reaches GMP age, he/she is likely to receive a pension increase statement that shows the

pension split out into its component parts as follows.

Pre 88 GMP

Post 88 GMP

Excess over GMP.


The scheme has no obligation to pay any increase on pre 88 GMP.

It must pay up to 3% (depending on inflation) on post 88 GMP.

The excess increases under scheme rules.

The above explains what has happened to your pension increase.

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Thank you. That's exactly what has happened and you have given a clear explanation. Much appreciated.

I regularly check my State Pension forecast.  I know I have three years where I have gaps in my NI contributions due to the contracting out and am on the case to cover these.

I'm almost afraid to ask - but will I have another 'surprise' when I get to 67 and my State Pension age?  Will the contracting out that my company did affect my State Pension?

Marcon

Maz1963 said:

I regularly check my State Pension forecast.  I know I have three years where I have gaps in my NI contributions due to the contracting out and am on the case to cover these.

I'm almost afraid to ask - but will I have another 'surprise' when I get to 67 and my State Pension age?  Will the contracting out that my company did affect my State Pension?

What does your state pension forecast say? 

Maz1963

Marcon said:

Maz1963 said:

I regularly check my State Pension forecast.  I know I have three years where I have gaps in my NI contributions due to the contracting out and am on the case to cover these.

I'm almost afraid to ask - but will I have another 'surprise' when I get to 67 and my State Pension age?  Will the contracting out that my company did affect my State Pension?

What does your state pension forecast say? 

£221.20 a week. Which seems to be the full amount?

molerat

Maz1963 said:

Marcon said:

Maz1963 said:

I regularly check my State Pension forecast.  I know I have three years where I have gaps in my NI contributions due to the contracting out and am on the case to cover these.

I'm almost afraid to ask - but will I have another 'surprise' when I get to 67 and my State Pension age?  Will the contracting out that my company did affect my State Pension?

What does your state pension forecast say? 

£221.20 a week. Which seems to be the full amount?

Is that what you have accrued to date or is that the top line big green box amount with caveats below to how you can achieve that amount ?

Your forecast pension amount will not be affected by contracting out, that is already factored into the amounts shown. 

Harvester963

Do you know the answer then if I have a GMP pension and in line with my other scheme pension it gets increased every September not April. Am I due backpay from the April to September if GMP should have got increased every April??

Marcon

Harvester963 said:

Do you know the answer then if I have a GMP pension and in line with my other scheme pension it gets increased every September not April. Am I due backpay from the April to September if GMP should have got increased every April??

GMPs increase in deferment (the time between leaving active membership of a scheme, and drawing your benefits from it) each time they go through a tax year end (ie 5/6 April). That applies until you reach GMP age.

Once you've reached GMP age (65 for men/60 for women, however much your scheme has been writing to you about GMP equalisation!), the position changes and increases to your whole pension (GMP and any excess over GMP/non-GMP benefits) are increased in line with the rules of the scheme, subject to any statutory minimum increases. 

If you've reached GMP age, and your pension is in payment, there is no backpay due.