in plain english what does the following mean?

ALYMAC76

i have an old final salary pension with my last employer, had 9 years service and its current value per annum is £3453, the letter from pensions administrators advises...

"Your pension will increase by the lesser of the increase in Retail Prices Index and 2.5% for each complete year between date of leaving and Normal Retirement Date"

So i worked out growth in last year was just under 4%.

What does it mean by the lesser of the increase in Retail Prices Index????

What % of growth can i expect most years?

Retirement date is June 30th 2038....

bristol_pilot

It means you get a yearly increase of either RPI or 2.5%, whichever is less.

If RPI is 4.1% you get 2.5%

If RPI is 1.9% you get 1.9%.

ALYMAC76

Thanks, how did grow by 4% last year then?

seven-day-weekend

I have a similar thing on my deferred LGPS : in this case when it says it has grown by 4% it means altogether, not just the last year. i.e. since it was deferred in 2004.

At least I've always assumed it meant that.

Curious_Moose

Maybe there is a Guaranteed Minimum Pension (GMP) element to your deferred pension. Depending on when you left, that could increase each tax year by a fixed rate of 8.5%, 7.5%, 7%, 6.25%, 4.5% or 4%.

That might make the overall increase 4%.

http://www.rlam.co.uk/scotlife/Web/Site/Adviser/TechnicalCentralArea/Rates&FactorsArea/FixedRateGMPRevaluation/FixedRateGMPRevaluationHome.asp?menuID=19&MenuItemID=250&MenuType=PAGE

Naughty_Sausage

Hi

Do you mean that your pension seems to have grown by 4% in the last year?

If so, I think you are getting confused between the way your pension revalues (increases between date of leaving the scheme and date of retirement) and increases (how the pension increases each year when in payment).

ALYMAC76

Thanks folks

fg22

The increases may depend on when your benefits were earned. For those earned between 97 and 05 the minimum increase is the lower of RPI or 5%. See http://www.pensionsadvisoryservice.org.uk/pension_rights/pension_increases/ for details.