Winding up lump sum offer

Mrupsidedown

Marcon said:

DRS1 said:

But as part of the winding up the surplus or part of it may be applied to enhance benefits in some way (eg adding a guaranteed level of pension increase) and that enhancement would then be part of the buyout terms.

Indeed, but it's not clear if the scheme is in surplus on a discontinuance basis, so there may be no surplus to consider. If there are enhancements then members would have been told about them as part of the comms process, and given the chance to raise objections with the pensions regulator about how the surplus, if any, had been handled. OP, have you yet had any info covering that? 

Thank you again for your comments, it really does help.

OP, have you yet had any info covering that? 

No info, only the transfer letter/form and a covering letter.

As you commented, the RPI increase in GRP is stated to be paid by HMG, but no indication of the change you stated, this is a letter from 2004.
I asked Mercer a general question about the pension details. But it will be a few days before they respond, and I may have to clarify, to get all the info.

Albermarle

Mrupsidedown said:

Marcon said:

DRS1 said:

But as part of the winding up the surplus or part of it may be applied to enhance benefits in some way (eg adding a guaranteed level of pension increase) and that enhancement would then be part of the buyout terms.

Indeed, but it's not clear if the scheme is in surplus on a discontinuance basis, so there may be no surplus to consider. If there are enhancements then members would have been told about them as part of the comms process, and given the chance to raise objections with the pensions regulator about how the surplus, if any, had been handled. OP, have you yet had any info covering that? 

Thank you again for your comments, it really does help.

OP, have you yet had any info covering that? 

No info, only the transfer letter/form and a covering letter.

As you commented, the RPI increase in GRP is stated to be paid by HMG, but no indication of the change you stated, this is a letter from 2004.
I asked Mercer a general question about the pension details. But it will be a few days before they respond, and I may have to clarify, to get all the info.

Aptia have taken over the pensions administration side of Mercer. Are you sure you are still dealing with Mercer ?
In any case you will probably be lucky if you get a response in a few days, or even a few weeks.......

Marcon

While you wait, I think I can make a reasonable guess at the GMP/excess split, even without seeing the rules/relevant information. 

Your pension effectively has three ‘layers’ for want of a better word:

1. the GMP for the whole period 1980-86
2. the excess over GMP layer relating to pre-1.1.85 membership
3. the excess over GMP layer relating to membership from 1.1.85.

In the absence of any ‘better than statutory’ provisions in the rules (and of course I’ve not seen them, which is why this answer can’t be definitive), the following will have been happening since you left in 1986: 

1. the GMP will be ‘revaluing’ – increasing annually in the way set out in the rules. There are various ways in which this could be done, but one common way was revaluing at a fixed annual rate. In your case, because you left in 1986, the rate would be 8.5% pa if your scheme used this method
2. nothing has been happening in relation to this layer
3. this layer revalues - broadly at the lower of 5% or price inflation.

As you will deduce from the above, the GMP layer is steadily increasing and encroaching on the excess over GMP layers, meaning that the proportions shift. An increasingly bigger part becomes classed as GMP, and the excess over GMP forms a smaller part, as the years go by. 

Your scheme must provide a pension at least equal to your GMP when you reach GMP age: still 65 for men, and 60 for women. It’s quite possible that most of your pension - possibly all - is going to be GMP by the time you hit 65. Your first post included the following information, which gives a useful clue:

 Mrupsidedown said:

Age: 63. 
Pension from previous employer from 6/4/1980 to 31/01/1986 as a student on summer placements.
Deferred benefit: £522.84 per annum. From 1/4/2027,  not available before then?

As you probably know, taking your pension before a scheme’s Normal Retirement Date usually means the starting level of the pension is reduced because it is being paid sooner than expected, and for longer. If you have been told you cannot take the pension early, the most likely reason is that the GMP wouldn’t be covered when you reach age 65. 

What does that mean in practical terms? Nothing much. There won’t be any increases of any part of your pension once it comes into payment, unless your rules provide otherwise. The GMP layer won’t be increased by the state - which nobody would have known when your 2004 document was written.

The choice for you is likely to be driven by your preference for certainty (do nothing) v opportunity (transferring or taking the winding up lump sum). 

Marcon

Mrupsidedown said:

There is a transfer value offered of £7200 but that is not confirmed.

What do I do?


Maybe I need someone to look over the pension in detail?

Picking up on something else from your fantastically informative post - you appear to have been given an 'indicative' transfer value. Ask the administrators now for a Cash Equivalent Transfer Value. That will give you a figure which is guaranteed for 3 months from the date of calculation should you decide to transfer the funds to your SIPP. The CETV should also come with 'extra' information about how much is GMP etc, which might kill a number of birds with one stone.

Mrupsidedown

Thank you again, particularly Marcon.
It is Aptia operating the scheme currently, I log onto a Mercer web site, but I think it changes to Aptia as I login. It is a 10-15 day response time for any enquiry.
The transfer value is from a calculation available on the Aptia web site and was not offered in the buyout offer. I asked for the calculation. But certainly I will ask for a CETV.
I add this if it helps.
23/5/1986: Certificate of entitlement to deferred pension statement.
Deferred pension at date of leaving £117.90, included GMP of £35.88.

19/2/2004 Possible transfer of pension rights offer.
Proposed transfer payment: £1117.03, Proportion of transfer payment relating to GMP: £562.49.
Total members contribution included in transfer: £195.61.
Final pensionable earnings: £1367.

Alternative: Preserved pension at date of leaving: £117.90, same as 23/5/1986.
GMP: £34.84, not the same as 23/5/1986 - £35.88.
The whole of the preserved pension (£117.90) will be increased according to the following until SPA:
Preserved pension (£117.90-£34.84=£83.06) will be increased by the lesser of 7% PA compound or RPI.
GMP (£34.84) will be increased by 5% compound for each complete tax year until SPA.

Post retirement pension increase:
Once in payment all of the pensions quoted... where appropriate increased annually.
... an annual maximum of 7%
GMP element: Pre 1988 GMP are excluded  from receiving post retirement increases following SPA.
The excess: The TI increases are applied in full. 
It gives a table of the TI increases from 1996 to 2002, 2.7%, 2.6%, 3.5%, 2.1%, 2.6%, 2.3% and 1.3% respectively.

I can get 4.5% on an instant access account with Ulster Bank or LGEN pay 7-8% dividends on their shares, plus any capital gain/loss.

DRS1

I can get 4.5% on an instant access account with Ulster Bank or LGEN pay 7-8% dividends on their shares, plus any capital gain/loss.

Those may not be good comparisons to the increases on the pension.  For one thing those rates won't last for the rest of your life.   And in the case of LGEN the value of your capital can go down as well as up.

The pension increases look quite generous for a private sector scheme - the cap of 7% on inflation increases is higher than anything else I have seen.  Usually the cap would be 5% (or more recently 2.5%).  You might want to have a look at the figures for the two recent years when inflation was at 10% or 8% and see what this scheme's increase would be compared to a scheme with a 5% cap.  You'd be getting an extra 2% one year and an extra 2% on top the next year and that would stay baked in to your pension for the rest of your life.

What interests me is the 5% increases on GMP in deferment.  That suggests Limited Rate Revaluation instead of the Fixed Rate Revaluation mentioned by @Marcon.  I thought that was unusual....  and abolished in 1997.  But presumably schemes which had already adopted it (and paid the premium) were allowed to continue to use it for those who were already deferred members at the time?  I wonder what the state does about any excess increases? All wrapped up in the new State Pension?