Pre 97

beyondthestars

What is the pre97 amount added to latest pension statement?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6655368/pre-97

Is this statement something you have received from DWP relating to your State Pension?

beyondthestars

Yes a letter arrived

dunstonh

It relates to SERPS entitlement built up before 6th April 1997. Often simplified to pre and post 97 rights.

beyondthestars

Why would it be paid when someone is 82? It's not been paid before

SnowMan

Under accrual of the old pre 1997 state pension scheme (as applied to an individual reaching State Pension Age before 6th April 2016) an individual would earn basic state pension and additional pension through SERPS.

If that individual was contracted out of SERPS then the DWP would work out the SERPS they would have earned had they been contracted in throughout and then deduct a contracted out deduction (COD) for the period of contracting-out and it was the net amount that formed their additional state pension. Think of the calculation as

Basic State Pension

plus additional state pension pre 97 (=c/in SERPs less COD pre 97)

plus additional state pension (post 1997)

Because of the complexities of this calculation of the additional state pension pre 97 the increase rate up to SPA could differ between c/in SERPS and the COD bits of the calculation. Often the increase rate on the c/in SERPS (national average earnings) would be less than the increase rate on the COD (often a fixed rate such as 8.5% that turned out to be more than national average earnings on average turned out to be).

What that meant was that the additional state pension pre 97 (i.e. the c/in SERPS less COD bit) at SPA above could be negative at SPA and often was. In that scenario they didn't reduce the overall state pension but treated the additional state pension pre 97 element as zero at SPA.

However quietly in the background after SPA they have been adding annual increases in payment to all of the elements in the above calculation (basic state pension, additional state pension pre 97 and additional state pension post 97) and again making sure to set the additional state pension pre 97 to zero and not a negative amount each year.

In relation to the additional state pension pre 97 the c/in SERPS element has been increasing in payment in line with prices, whereas the COD (pre 97) has been increasing at a lower rate of only some mix of 0% and 3% (or inflation if less).

What this meant is that the c/in SERPS less COD calculation part of the calculation was quietly actually becoming less negative year on year and eventually a point has been reached where c/in SERPS less COD pre 97 becomes positive.

At that point pre 97 additional pension appears out of nowhere.

This is probably what has happened to you. It means in future years you will continue to have additional pension pre 97 which will usually increase year by year.

Storcko14

Excellent explanation. It's really quite simple when you see it all written down ;-)