In receipt of additional state pension which was reduced by the amout of inherited GMP she recived w

Billopp

I would like to bring to people's attention an article I saw in the Telegraph on 2 December 2024 which is about a woman who had her own additional pension that she was receiving paid by the DWP  reduced by £150 a month which was the 50% inherited GMP she was receiving from her husbands occupational pension scheme as part of his occupational pension.

 I would be interested to know if what the DWP has done is correct and if so why as I don't think the DWP have dealt with it correctly.

According to the article she was contracted out all her working life and reached state pension age in 2011 under the old state pension and he was 68 when he died in January this year. As he was 68 when he died he must have died under the new state pension rules. He had been contracted out for nine years 

https://www.telegraph.co.uk/money/pensions/state-pensions/qualify-for-full-state-pension-dwp-cut-it-150-a-month/

‘I qualify for a full state pension – why has the DWP cut it by £150 a month?’

Keep_pedalling

Don’t know the article is behind a paywall.

Marcon

Billopp said:

I would like to bring to people's attention an article I saw in the Telegraph on 2 December 2024 which is about a woman who had her own additional pension that she was receiving paid by the DWP  reduced by £150 a month which was the 50% inherited GMP she was receiving from her husbands occupational pension scheme as part of his occupational pension.

 I would be interested to know if what the DWP has done is correct and if so why as I don't think the DWP have dealt with it correctly.

According to the article she was contracted out all her working life and reached state pension age in 2011 under the old state pension and he was 68 when he died in January this year. As he was 68 when he died he must have died under the new state pension rules. He had been contracted out for nine years 

https://www.telegraph.co.uk/money/pensions/state-pensions/qualify-for-full-state-pension-dwp-cut-it-150-a-month/

‘I qualify for a full state pension – why has the DWP cut it by £150 a month?’

Why do you think the DWP has dealt with it incorrectly, especially in the light of the very well structured answer from Charlene Young, which gives an entirely credible explanation (albeit of a totally bonkers system)?

Not much point speculating on whether the DWP have dealt with it correctly until they've provided 'Doreen' (the complainant) with further information to confirm the calculations.

xylophone

SEE https://researchbriefings.files.parliament.uk/documents/CBP-10114/CBP-10114.pdf

PAGE 22/23

Billopp

Marcon. The reason I think the journalist is wrong is the only reason a person receives a NI rebate was to compensate for the additional state pension they were made to forgo and nothing else when their final salary pension scheme contracted out of SERPS. It did not increase their occupational pension. All the occupation had to promisse was that the pension they paid would not be less than the additional state pension forgone

As a final salary pension is based on a formula it is not possible to increase the persons pension based on years of service and salary.

In any case what is the point of  an occupational pension scheme paying what is known as inherited GMP which is part of her husbands normal pension entitlement and not on top of it if spouse has it deducted from their own additional state pension. What would the DWP deduct it from if spouse did not have any additional state pension because they were contracted out.

I assume that was what the journalist was told by the DWP so that they would not ask any more awkward questions.

Billopp

  xylophone

Have a read of my reply to Marcon.

I think from my understanding of the link you attached  any additional state pension and inherited GMP should be deducted fro  the total additional state pension the survivor is entitled to plus the maximum the deceased was entitled to if neither had been contracted out  and not just deducting it from  the survivors own additional state pension.

That is what has gone wrong in the DWPs calculation.

By doing this calculation it also pays out to the survivor  the other 50% as additional state pension as when contracting out started they used to pay 100% inherited additional state pension and the occupational pension scheme used to only have to pay 50%  as inherited GMP as part of normal pension entitlement and not on top of.

If you are interested I can send the links explaining this.

xylophone

Previously discussed here

https://forums.moneysavingexpert.com/discussion/6373073/inherited-pension-less-than-inherited-contracted-out-deductions-newly-widowed-worse-off/p1



See

https://www.whatdotheyknow.com/request/do_widows_and_widowers_have_mone

Billopp

xylophone  Thanks for the links I will now study them and come back to you.

Billopp

I’ve now had a chance to study the links you sent me.

Common Misconceptions in Newspaper Articles

One thing all the articles have in common is that they claim GMPs were funded by NI rebates or that occupational pensions were increased.
Neither claim is correct.

The only reason employers and employees received NI rebates was to compensate for the additional state pension forgone. This is backed up by two reports by the Government Actuary:

1. Government Actuary – Review of Certain Contracting-Out Terms (2006)

   • Section 2.9 states: "The rebates I have calculated are not set at a level that guarantees the accumulated rebates will be sufficient to provide the same level of additional pension benefits as that forgone from the National Insurance Fund." This makes it clear the rebates were to cover the state pension forgone, not to enhance occupational pensions.

2. Government Actuary – Review of Certain Contracting-Out Terms (2011)

   • Sections 13.2 and 13.3 explain that changes to NI rebates affected only the rebate levels, not the pensions employers were required to provide.

Barbara Castle’s Statement on GMP Responsibility

During the Second Reading of the Social Security Pensions Bill in 1975, Barbara Castle made it clear that occupational pension schemes would only need to pay 50% of GMP as a widow’s pension, with the state additional pension covering the other 50%. She explicitly stated that contracted-out schemes were not required to take on extra liability for the full GMP inheritance.

Her statement reads:

“The State scheme will provide everyone with the basic component of all pensions. It will also provide the whole of invalidity pensions—namely, both the basic and additional components. The contracted-out occupational scheme will undertake to provide the equivalent of the additional component of retirement pensions and half that component for widows' pensions. Where widows are concerned, the State scheme will provide the other half.”

This explanation shows there was no intention to deduct inherited GMP from a widow’s own additional state pension.

Full debate transcript:
Social Security Pensions Bill Debate, 18 March 1975

DWP Calculation Problem

An old DWP guide, NP46, April 2005, further clarifies how GMP inheritance works. On page 46, it explains:

"You will be entitled to half of any Guaranteed Minimum Pension (GMP) that your late husband had derived from his membership of a contracted-out salary-related (COSR) scheme... This will be added to your own GMP(s) earned... and the total deducted from the combined additional State Pension earned during that period which would have been paid if neither of you had been contracted out."

This shows the deduction should be made from the combined additional state pension earned by both partners, not just the widow’s own additional state pension.

Real-Life Examples and Survivor Impact

The DWP’s current practice of deducting GMP solely from a survivor’s own additional state pension creates significant issues. Survivors may not be receiving their full entitlement as the rules intended.

For instance, as explained in:
LCP: Why is money being deducted from my state pension? (2022) (pages 17-18):

• A widow can inherit up to 100% of her spouse’s gross SERPS while only 50% of the GMP is deducted. This creates the possibility of inheriting additional pension even if the spouse had no net entitlement due to being extensively contracted out.

Additionally, the Research Briefing on the Old State Pension (2024) on pages 22-23 emphasizes that lower National Insurance contributions were meant to reflect only the additional state pension forgone. There’s no evidence they were designed to subsidize occupational pensions or justify deductions from a widow’s additional state pension.

Conclusion

From the above evidence, it seems the DWP is not calculating inherited GMP and SERPS as originally intended. By not basing deductions on the combined additional state pension (as explained by Barbara Castle and DWP documents), many survivors may be unfairly losing out on their entitlements.

Let me know your thoughts or if you’d like more clarification.

xylophone

https://forums.moneysavingexpert.com/discussion/5460335/inherited-additional-serps-pension/p1

An illustration in link above.

And  see here for a worked example explaining how DWP did the calculation for this widow.  As far as i know, this is how it works.

https://forums.moneysavingexpert.com/discussion/comment/79027229/#Comment_79027229

Billopp

xylophone

Thanks for the additional links.

The reason I became interested in the subject of inherited GMP deduction was that I saw an article about it in a newspaper last year. Because of this I contacted the DWP to see what would happen if I died before my wife or if she died before me.

I was contracted out all my working life and my wife was never contracted out so we were in the same position as the people mentioned in the articles.

Both my wife and I received very detailed replies. As far as I can see my wifes own additional state pension would not be reduced if I died before her and that it increased  because she inherited the 50% additional state pension not paid by my occupational pension as mentioned by Barbara Castle in the information I sent in my last email 

The following is the letter regarding what my wife would receive if I died before her.

From the calculation you will see that they used the additional pension I would have received if I had never been contracted out. If you study it you will see that in the calculation they used 80% of the additional pension I would have received which was £154.53 and not 50% of £123.62.

The additional state pension that she was receiving before my death in the calculation is £68.79 which increases to £140.26 because she inherited a percentage of the actual additional state pension I was receiving and then other 50% payable  as mentioned in the Barbara Castle information I sent you and the calculation described in the DWP pension booklet I sent.

As you can see her own additional pension would go up considerably on my death and not decrease as mentioned in newspaper articles.

I think that depending on how knowledgeable the person at the DWP is in dealing with death claims you get different answers either correct or wrong.

What do you think?

The other thing that interests me is the link to bazwid as in the letter I received from the DWP last year it shows that I exceeded the maximum additional state pension if I inherit additional pension from my wife because they use the additional pension I would have received if I had never been contracted out rather than the actual which is well below the maximum so when adding any inherited additional state pension it is still much less than the maximum.

I queried why they used the additional state pension I would have received and not actual they said it was because I had benefited because I had a GMP which was not correct as it was part of my normal pension entitlement and not something extra.  I think the DWP think that my NI rebate and employers rebate went towards providing the GMP which it did not because it was for the additional state pension I was made to forgo when my employer decided to contract of so that they did not have to pay the increase in NI to pay for the state additional pension as they were already providing a generous pension to their employees.

All the newspaper articles mention that NI rebates went towards subsidising the occupational pension or increasing the occupational pension which were final salary pensions which were based on a formula which does not increase  ie years of service and salary so by paying extra it does not increase the occupational pension. None of them ever mentioned that NI rebates were for additional state pension forgone.

I would be interested to know where they were obtaining the information from. Possibly the DWP.

bazwid Posts: 6 Forumite 

9 May 2016 at 4:36PM

Previous notification of my own pension from April 2016 gave a pre 1997 nett ap of £27.42, being £105.56 less COD of £78.14, with post 1997 ap being £40.90, a final total of £68.32. The revised pension to include inherited ap now show my own nett ap for pre 1997 was £45.32, being £123.46 less COD of £78.14.The ap for 1997-2002 was £15.08 and ap for post 2002 was £25.82, making a total nett ap of £86.22(£17.90 more than before). My wife's total ap amount specified by DWP is £79.60, so if this was added to my previous own total nett ap would be £147.92, which is less than the maximum additional pension from April 2016 of £165.60 quoted by DWP.
Do I have a strong case for appeal or am I wrongly interpreting the regulation.

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