Deferring GMP past GMP age when not in employment

I know we have some pension scheme administrators here, who must have dealt with this sort of thing before.

My wife has a deferred contracted out DB scheme from an employment in 1986-1998, the scheme has a NPA of 65.

As a woman her GMP age is 60. The GMP is currently revaluing at the fixed rate of 6.25% a year, and AIUI once she turns 60, if she doesn't take it, it will revalue at 1/7% per week, plus CPI inflation (capped at 3%) on the post 88 part.
Her intention is to take it at NPA of 65.

However, the legislation concerning the deferral of the GMP past GMP age seems to say that deferring is only allowed for people still "in employment".

So, if she is not in employment at age 60, does that mean she is forced to take the GMP then? Can the scheme force her to take the whole pension too, with the actuarial reduction for early retirement applied to the excess? I've seen one scheme's rules which seem to say that.

What do schemes with a NPA of more than 60 do for deferred female members with GMP as they approach 60? Do they write to them asking them if they're in employment, and if not tell them they have to take the pension, or maybe just the GMP element, at 60?
The legislation doesn't seem to define what "in employment" actually means, eg is 1 hour a week OK, or a zero hours contract where she might not actually work at all??
TIA

Comments

  • xylophone
    xylophone Posts: 44,139
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    https://www.gov.uk/guidance/provide-a-pension-for-your-scheme-member

    Payment of a scheme pension (including the GMP element) may be deferred after pensionable age if the member continues in employment. However, the member must consent to deferment if the:

    GMP relates to a different employment to that in which they are currently employed
    deferment includes a period which is 5 years after they reached age 60 for women and 65 for men

    If the deferment is for 7 weeks or more, the scheme must increase the GMP by one seventh of a per cent for each complete week in the period of deferment. The increment calculation is based on the pension value at the end of the period of deferment which will include any inflation proofing.


    Your wife should contact the scheme administrator to check the position?

    Has she obtained a state pension forecast?
  • zagfles
    zagfles Posts: 20,274
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    xylophone wrote: »
    https://www.gov.uk/guidance/provide-a-pension-for-your-scheme-member

    Payment of a scheme pension (including the GMP element) may be deferred after pensionable age if the member continues in employment. However, the member must consent to deferment if the:

    GMP relates to a different employment to that in which they are currently employed
    deferment includes a period which is 5 years after they reached age 60 for women and 65 for men

    If the deferment is for 7 weeks or more, the scheme must increase the GMP by one seventh of a per cent for each complete week in the period of deferment. The increment calculation is based on the pension value at the end of the period of deferment which will include any inflation proofing.


    Your wife should contact the scheme administrator to check the position?

    Has she obtained a state pension forecast?
    Thanks - I had read that webpage, it's really is an awful page.

    It mentions "pensionable age" but doesn't define what "pensionable age" it is - is it NPA of the scheme, state pension age, GMP age?

    It has bullets like
    However, the member must consent to deferment if the:
    • GMP relates to a different employment to that in which they are currently employed
    • deferment includes a period which is 5 years after they reached age 60 for women and 65 for men
    without an "and" or "or", ie do they both have to be the case or just one of them?

    But it's the "if the member continues in employment" that my question is about. What does that mean, and what are the implications, ie is she forced to take the GMP, or possibly the GMP plus excess, at 60?

    If so, presumably pension schemes must contact women approaching 60 and ask them if they're still in employment? Do they ask for proof? Would a zero hours contract do?
    In my wife's case, taking the pension at 65 would likely be beneficial. But it would appear she needs to be "in employment" to allow that?
  • xylophone
    xylophone Posts: 44,139
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    Your wife used to work for a certain company and was a member of its DB Pension Scheme which had a NRA of 65.

    She left in 1998 with a deferred pension which included GMP.

    In effect, by leaving her pension in the scheme she "consented to deferment"?

    Since the Scheme has a NRA of 65 for men and women (you have checked this?), presumably (unless Scheme Rules say otherwise) she cannot draw the pension without actuarial reduction until age 65.

    The scheme must by virtue of having a GMP for certain members, apply the rules relating to revaluation of that GMP as appropriate to men and women members.

    Therefore in your wife's case it revalues the female GMP up to age 60 in accordance with the rules and then applies the late retirement increase rules up to the time it is drawn?

    Whether or not she is employed seems immaterial to the case?

    Does she have a scheme booklet? What does it have to say regarding GMP?

    It seems to me that unless the booklet clarifies the situation, her best bet is to contact the Administrator and check.
  • zagfles
    zagfles Posts: 20,274
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    xylophone wrote: »
    Since the Scheme has a NRA of 65 for men and women (you have checked this?), presumably (unless Scheme Rules say otherwise) she cannot draw the pension without actuarial reduction until age 65.

    The scheme must by virtue of having a GMP for certain members, apply the rules relating to revaluation of that GMP as appropriate to men and women members.
    Yes. But the point is that the legislation seems to say that a GMP can only be deferred past GMP date if the member is "in employment".
    Specifically, Pension Schemes Act 1993 section 13. It doesn't define "in employment".
    Therefore in your wife's case it revalues the female GMP up to age 60 in accordance with the rules and then applies the late retirement increase rules up to the time it is drawn?
    Well it would have to if she was still "in employment". But what if she isn't - do schemes check, how, what proof do they need?

    This will be generic to any contracted out scheme that has a NPA over 60 and was contracted out pe 1997.

    How does the LGPS for instance deal with this? Anyone know?
  • xylophone
    xylophone Posts: 44,139
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    My wife has a deferred contracted out DB scheme from an employment in 1986-1998, the scheme has a NPA of 65.
    How does the LGPS for instance deal with this? Anyone know?

    Silvertabby is the expert on LGPS - I did find this


    Re LGPS deferred pension If you left the LGPS before 1 April 1998

    https://www.lgpsmember.org/arl/already-left-when.php
  • DairyQueen
    DairyQueen Posts: 1,822
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    I had a similar situation. Private sector DB scheme of which I was a deferred member from 1996. NRA 65 and GMP age of 60. I was not in employment when, in 2014, I sought clarification from the administrator about the difference in pension ages between GMP and the excess.

    The response was exactly as xylophone describes in post 4. The GMP and excess cannot be 'split' and taken at different ages so the options were:

    1) Take the whole pension anywhere between 60 and 65 with an early retirement reduction on the excess and revaluation of the GMP element.
    2) Take the whole pension at 65 without reduction on the excess but revaluation of GMP from age 60.

    The options were not conditional on my employment status at the time I took the pension.

    Note that the situation for me was then superseded by an enhanced CETV offer in 2017 and my (exceptional) circumstances were such that I was recommended (and took) a transfer-out.

    No idea how GMP will be impacted by the requirement to gender equalise. The last I read schemes would have different methodologies available:
    https://www.gov.uk/guidance/guaranteed-minimum-pension-gmp-conversion-and-equalisation
  • zagfles
    zagfles Posts: 20,274
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    xylophone wrote: »
    Silvertabby is the expert on LGPS - I did find this


    Re LGPS deferred pension If you left the LGPS before 1 April 1998

    https://www.lgpsmember.org/arl/already-left-when.php
    Thanks, this bit is interesting:
    However, if your pension is not in payment at age 60 (women) / 65 (men), the Guaranteed Minimum Pension (GMP) element (if any) of your pension may have to be paid from that date - this will depend on when you left the scheme and if you are still in employment. Contact your pension fund for more information about this
    Pity it's not a bit more specific about why/how date of leaving might affect things.
  • zagfles
    zagfles Posts: 20,274
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    edited 16 October 2019 at 5:24PM
    DairyQueen wrote: »
    I had a similar situation. Private sector DB scheme of which I was a deferred member from 1996. NRA 65 and GMP age of 60. I was not in employment when, in 2014, I sought clarification from the administrator about the difference in pension ages between GMP and the excess.

    The response was exactly as xylophone describes in post 4. The GMP and excess cannot be 'split' and taken at different ages so the options were:

    1) Take the whole pension anywhere between 60 and 65 with an early retirement reduction on the excess and revaluation of the GMP element.
    2) Take the whole pension at 65 without reduction on the excess but revaluation of GMP from age 60.

    The options were not conditional on my employment status at the time I took the pension.
    Thanks, interesting - the LGPS link above doesn't mention the employment status for retirees before 1 April 1998, just after, so dependant on date of leaving?
    Note that the situation for me was then superseded by an enhanced CETV offer in 2017 and my (exceptional) circumstances were such that I was recommended (and took) a transfer-out.

    No idea how GMP will be impacted by the requirement to gender equalise. The last I read schemes would have different methodologies available:
    https://www.gov.uk/guidance/guaranteed-minimum-pension-gmp-conversion-and-equalisation
    Yes it could all become moot if they convert GMP benefits to non-GMP as part of the equalisation process.
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