Defined benefit pension 1987-1995 GMP element

Tony_J

I have this modest pension I’ve been getting for 3 years now. I recently found an old “deferred pension certificate” that I think suggests I should be getting a larger payout than I am (by about 30%). I cannot pretend I properly understand it and have requested details of calculations from the provider, which I now have.

If I’m reading it correctly it looks like the part that has been allocated to GMP (which has an annual increase of 7%) is much lower than that used in the deferred pension certificate, although in the certificate there is not a detailed breakdown, but I’m inferring from the figures. In the calculations I’ve recently received there is a GMP element for pre 1988 and one post 1988. This looks odd, as the pre 1998, which would only be about 1½ years is more that a quarter of the post 1988 which would be up to the end of 1995.

I’d appreciate your thoughts on this if you have more of an understanding than me and perhaps how I could verify what I should be getting.

SnowMan

There is no reason that the pre and post 88 GMPs should be in exact proportion to the periods they relate to. Firstly post 88 GMPs accrued at a rate 4/5ths of that for pre 88 GMPs. Secondly GMPs accrued for individual tax years depended (amongst other things) on your tax year earnings and earnings limits for those individual tax years.

In terms of the GMP being 30% different to your calculation, without seeing your and their calculations or statements it is not possible to say anything meaningful about what you should ask for. Either you have got your calculation wrong or they have got their calculation wrong. If we guess you started to receive your pension at age 65 then the GMP element won't have increased at 7% over the past 3 years, because 7% is a deferment rate GMP increase (i.e for complete tax years between leaving and age 65 for a male) that can apply to GMPs where someone left between 6th April 1993 and 5th April 1997, whereas post age 65 the increases would be 0% (pre 88 GMP) or 3% or inflation if less (post 88 GMP).

Marcon

Have you looked at your latest pension increase letter? That'll show the increases to your pension now that it is in payment (if not, you can ask the scheme for them) on pre-88 GMP, post-88 GMP and 'excess over GMP' (as the name suggests, that's everything except GMP). In your case I'd expect it to read:

• pre-88 GMP: 0%
• post-88 GMP: 3% [this is capped at 3% however high the rate of inflation was]
• excess over GMP: no mandatory requirement to pay any given you left the scheme in 1995, BUT scheme rules can offer better than statutory requirements - and without knowing what your rules say, it's impossible to comment with any accuracy.

Silvertabby

Any chance this DB pension is public sector? If so, the scheme pays full increases (uncapped CPI) on both pre and post 88 GMP for those who reached SPA after April 2016.

Tony_J

Thanks for the replies.

1. Your correct and I had understood the 7% increase is only up to retirement age and on the GMP element only. I wasn't aware of the 4/5ths post 88 (though I thought there must be something changed for there to be a post & pre entry) "post age 65 the increases would be 0% (pre 88 GMP) or 3% or inflation if less (post 88 GMP)." I wasn't aware of this. Is this set in stone or might it vary depending on the rules of the scheme?.
2. I 'll look up the letters for the annual increases I got. Is it a requirement that they detail GMP etc it the letter?
3. Not public sector. I think it has been moved to a different provider at some point, but not certain.

Silvertabby

https://forums.moneysavingexpert.com/discussion/comment/82004068#Comment_82004068

Before 2016, it was standard for DB schemes (both public and private sector) to treat post retirement GMP increases thus:

Pre 88. O% by the pension scheme, but full% added to State pension.

Post 88. 3% cap paid by the pension scheme, with anything higher added to State pension.

As part of the 2016 State pension scheme simplification changes, it was decided that these increases would no longer be added to the State pension. After some transitional interim measures were considered, and discarded, the public sector decided that they would pay full pre and post 88 increases with their pensions. Private pensions had the same decision to make, but it seems that most have declined to make the payments themselves, instead leaving the old rules as part of their schedules. Even though they knew that these increases would no longer be added to post April 2016 retirees State pension.

This is something that you will need to query with your own pension provider. If you specifically ask about pre 88 increases, and over 3% post 88 increases, and they say that these will be paid with your State pension, then they are wrong.

xylophone

Before 2016, it was standard for DB schemes (both public and private sector) to treat post retirement GMP increases thus:

Pre 88. O% by the pension scheme, but full% added to State pension.

Post 88. 3% cap paid by the pension scheme, with anything higher added to State pension.

BUT for those with deferred pension and fixed rate revaluation on GMP……

see

https://forums.moneysavingexpert.com/discussion/comment/62891855/#Comment_62891855