Gmp Equalisation

kippo1

Hi
 i don't know if anyone can help,
i'm still 10 years away from retiring but i've just received a letter from aptia saying they owe
me some money for gmp equalisation and to fill in my details and they will deposit the money 
into my bank account.
By accepting this money even though i'm not retired do i leave myself open to any problems 
when i eventually take my pension in a few years time?

Thanks

Marcon

kippo1 said:

Hi
 i don't know if anyone can help,
i'm still 10 years away from retiring but i've just received a letter from aptia saying they owe
me some money for gmp equalisation and to fill in my details and they will deposit the money 
into my bank account.
By accepting this money even though i'm not retired do i leave myself open to any problems 
when i eventually take my pension in a few years time?

Thanks

Does this payment relate to a transfer out from a former pension scheme?

kippo1

Hi Marcon
Yes
The letter said "you used to be a member until you transferred out your benefits on 14th october 1997"

Marcon

Then they are simply following a well-recognised path where someone transferred out before benefits were equalised, and you are owed a top up. There is no impact on your future pension, so making a cash payment to you isn't going to cause you problems further down the line. 

kippo1

Thanks Marcon
i'll send the paperwork off then.

FIREDreamer

Marcon said:

Then they are simply following a well-recognised path where someone transferred out before benefits were equalised, and you are owed a top up. There is no impact on your future pension, so making a cash payment to you isn't going to cause you problems further down the line. 

I would hope this doesn’t invoke MPAA as you aren’t flexibly accessing a DC pension.

Usually a higher transfer value to another pension is offered instead.

Marcon

FIREDreamer said:

Marcon said:

Then they are simply following a well-recognised path where someone transferred out before benefits were equalised, and you are owed a top up. There is no impact on your future pension, so making a cash payment to you isn't going to cause you problems further down the line. 

I would hope this doesn’t invoke MPAA as you aren’t flexibly accessing a DC pension.

Nothing to do with the MPAA, for the reason you go on to give!

FIREDreamer said:

Usually a higher transfer value to another pension is offered instead.

Normally schemes would offer a cash payment (with some exceptions) if the top up is no more than £10K, or £18K if the scheme paying it is in wind up. This is the much more common approach, given the practical difficulties which can be associated with trying to add to a transfer which has already been paid out - eg the receiving scheme might not be prepared to accept it/might have wound up and be unable to accept it; the member might already have cashed in their benefits or used them to secure retirement benefits; there could be tax complications.

theblueflash

I was in process of starting thread on this exact same question as OP - so have just added here rather than startling a new thread. I understand the “small lump sum process” but my initial research seems to indicate that I need to confirm with Aptia that this is an “agreed relevant accretion” ? 

If Small Lump Sum is paid as pension income - will it be issued with P60 to correct income tax? 

If we were to request a pension top-up to the original receiving scheme for my transfer (still my Fidelity GPP) - are they likely to agree ?  As a 48% tax payer that would be by far my preference but it’s not mentioned anywhere as an option in the Aptia letter. 

So - I’ll try and make this story and question as simple as possible….

1. I transferred out of my co-op defined benefit scheme in 2019 to my Fidelity GPP. I am not yet 55. 

2. I have just received a letter saying that the DB scheme was involved in a legal case in 2020 that was looking at GMP equalisation (Lloyds Bank Pension transfer court case 2020)  - and if that component of the DB scheme had been calculated correctly in transfer. 

3. It transpires that it hadn’t - and now they are looking at every pension transfer made in the period covered by the case and assessing it. 

4. They have calculated that my Transfer Value was incorrect and I am owed a gross amount of £8000 that they are proposing to pay as a small lump sum payment - 25% tax free with the rest as “pension income” taxed at 20% and seem to infer that this is taxable income that I will then need to allow for in self-assessment etc. 

I am worried that if I accept payment in this form - it will trigger MPAA? - Any views ? As I said - I’m not 55 yet so the concept of receiving taxable pension income is a bit foreign. 

Thank you

Marcon

theblueflash said:

I was in process of starting thread on this exact same question as OP - so have just added here rather than startling a new thread. I understand the “small lump sum process” but my initial research seems to indicate that I need to confirm with Aptia that this is an “agreed relevant accretion” ? 

If Small Lump Sum is paid as pension income - will it be issued with P60 to correct income tax? 

If we were to request a pension top-up to the original receiving scheme for my transfer (still my Fidelity GPP) - are they likely to agree ?  As a 48% tax payer that would be by far my preference but it’s not mentioned anywhere as an option in the Aptia letter. 

So - I’ll try and make this story and question as simple as possible….

1. I transferred out of my co-op defined benefit scheme in 2019 to my Fidelity GPP. I am not yet 55. 

2. I have just received a letter saying that the DB scheme was involved in a legal case in 2020 that was looking at GMP equalisation (Lloyds Bank Pension transfer court case 2020)  - and if that component of the DB scheme had been calculated correctly in transfer. 

3. It transpires that it hadn’t - and now they are looking at every pension transfer made in the period covered by the case and assessing it. 

4. They have calculated that my Transfer Value was incorrect and I am owed a gross amount of £8000 that they are proposing to pay as a small lump sum payment - 25% tax free with the rest as “pension income” taxed at 20% and seem to infer that this is taxable income that I will then need to allow for in self-assessment etc. 

I am worried that if I accept payment in this form - it will trigger MPAA? - Any views ? As I said - I’m not 55 yet so the concept of receiving taxable pension income is a bit foreign. 

Thank you

Everything you've said puts you in HMRC's definition of 'relevant accretion'. Go back to Aptia and say you'd prefer to have a transfer to your GPP.

The MPAA point has been covered above, twice! So to make up the hat trick: accepting a cash payment in relation to a GMP top up does not trigger the MPAA.

David_Watts2

Started a new thread on the same subject as I didn't spot this one. I've also had the "Aptia letter" having transferred out in 2019 (pension in drawdown with RL).

My remaining questions would be as follows:

Is there any merit in taking the recommended financial advice? The only reasons I can think of are if it's likely that the payment amount might be significantly lower than it should be or if there are any tax implications that I haven't considered. The amount in question is £5.5k.

Is there any easy way of avoiding the tax hit or do I just have to take it on the chin? Not sure if it's already been established that RL will or won't accept additional payments in these circumstances. In the previous tax year I took a small payment from my pension that was within my remaining tax allowance but I won't have that luxury this year.

What happens if I don't accept the offer within the 2 month deadline? The letter offers the fairly vague "the options available to you and the process of obtaining payment may change". 

Marcon

David_Watts2 said:

Started a new thread on the same subject as I didn't spot this one. I've also had the "Aptia letter" having transferred out in 2019 (pension in drawdown with RL).

My remaining questions would be as follows:

1. Is there any merit in taking the recommended financial advice? The only reasons I can think of are if it's likely that the payment amount might be significantly lower than it should be or if there are any tax implications that I haven't considered. The amount in question is £5.5k.

2. Is there any easy way of avoiding the tax hit or do I just have to take it on the chin? Not sure if it's already been established that RL will or won't accept additional payments in these circumstances. In the previous tax year I took a small payment from my pension that was within my remaining tax allowance but I won't have that luxury this year.

3. What happens if I don't accept the offer within the 2 month deadline? The letter offers the fairly vague "the options available to you and the process of obtaining payment may change". 

1. A fortune has already been spent doing these wretched calculations, so the chances of the calcs being redone are close to zero, even if the adviser had both the requisite scheme data and the skills/knowledge/software. The statement is there for the tiny minority of people for whom there might be a tax issue, and who might later complain they weren't told of the possibility.

2. You'd need to check with RL; Aptia won't and can't do that for you. If you are under 75 and take the cash, you may have scope for paying into a personal pension (either RL or another of your own choice) if you are under 75, haven't used the whole of your annual allowance in respect of pension contributions (if still earning), or could pay £2,880 - topped up at basic rate by the provider to £3,600 - this tax year and next if you have no 'relevant earnings'.

3. The deadline is to encourage people to get on with it. It's not a case of 'claim now or miss the boat'.

Just a passing thought - you refer to 'taking the tax hit on the chin' but as you weren't actually expecting anything, you are still £1,375 (25% of £5.5K tax free) + the post-tax £4,125 (£3,300 if you are a basic rate taxpayer) better off...