Deferred GMP only pension and early retirement

tarbat · 27 June 2019 at 5:16PM

tarbat wrote: »

Yes, I've also been offered a "transfer value" so that I can hopefully take 25% lump sum and a pension now. Just waiting to receive the transfer value.

So I've now received the transfer value figure, it's around £37,500. What are the rules about using this CTV to take a lump sum and buy an annuity?

National Grid use fixed rate revaluation, so 8.5%, taking an original GMP in 1984 of £106 pa up to £2,170 pa at age 65.

I'm currently age 62. So, could I transfer to a scheme that used Section 148 revaluation, which would then require a GMP of less than £500 pa, and so free up a large amount of the CTV to take as a lump sum? And can this lump sum be greater than 25%? (I understand the tax implications of taking a lump sum > 25%)

I'm seeing an advisor tomorrow about buying the annuity, but would like to be prepared!!

xylophone · 27 June 2019 at 6:22PM

could I transfer to a scheme that used Section 148 revaluation,

These are more often than not statutory style pension schemes (NHS/CSPS/TPS etc)

See

https://www.gov.uk/guidance/transfer-your-scheme-members-contracted-out-pension-rights

You mention that the value of the safeguarded benefit (the GMP) is greater than £30,000.

Have you checked whether you will need the advice of a pension transfer specialist?

See link in post 6 above.

https://gas.nationalgridpensions.com/active/transfers#transfer_out

Transferring out

You will need to:

Take financial advice if your transfer value is more than £30,000

tarbat · 27 June 2019 at 6:54PM

xylophone wrote: »

Have you checked whether you will need the advice of a pension transfer specialist?

Yes, I'm seeing my advisor tomorrow, but want to be prepared. It's also a requirement of the transfer from National Grid.

The link you provided was very helpful, telling me that "The receiving scheme must revalue the GMP rights accrued up to 5 April 1997. There are no restrictions as to whether fixed, limited or Section 148 revaluation can be applied"

So, presumably I could transfer into a Personal Pension scheme, use some of the transfer value to buy the GMP annuity, but using Section 148 to revalue it rather than the more generous 8.5% that National Grid have been using. That results in a much lower GMP requirement.

So, my remaining question is, can I take more than 25% as a lump sum? My rough calculations based on today's annuity rates:
- Transfer Value from National Grid = £37,500
- Original GMP on leaving in May 1984 = £106 pa
- Revalued GMP = £523 pa, using 393% increase from current section 148 table.
- To buy that annuity would use up approx. £12,500 of the transfer value (at 4.2% annuity rate)
- Leaving £25,000 available as a lump sum.

That is a 67% lump sum - am I allowed to take that high a percentage? And yes, I realise I'll pay income tax on anything over the 25%.

xylophone · 27 June 2019 at 8:13PM

What you actually have is the CETV of your revalued GMP.

You would be transferring to some form of personal pension.

This has no GMP requirement.

This is just a "holder" for that money which you could then use as you choose within pension rules.

You could buy an annuity having taken a tax free lump sum.

You could take a PCLS and draw down the balance over time.

You could withdraw it all at once, bearing in mind that anything over the PCLS would be taxed as income in the year of receipt.

Brynsam · 27 June 2019 at 8:53PM

tarbat wrote: »

So I've now received the transfer value figure, it's around £37,500. What are the rules about using this CTV to take a lump sum and buy an annuity?

If you are looking at transferring out with a CETV of £30,000+, you'll need to take advice (mandatory - could cost around £5K or more) and there are strict deadlines you'll need to meet - the clock is already ticking, so you need to crack on immediately if you are considering a transfer.

tarbat · 27 June 2019 at 9:08PM

xylophone wrote: »

What you actually have is the CETV of your revalued GMP.

Understood. I believe it's the CETV of the revalued GMP, but then discounted by 3 years, at 8.5% pa, to reflect that I'm taking the CETV 3 years before age 65.

xylophone wrote: »

You would be transferring to some form of personal pension.
This has no GMP requirement.

So maybe that's where I'm going wrong. I thought that if I transferred a DB pension with a GMP component into a Personal Pension, it still had to provide a GMP at age 65. That's one of the questions that National Grid ask on the transfer forms if transferring to a Personal Pension, to quote:
If the Member's transfer value includes GMPs liabilities, the annuity policy will be an "appropriate policy" for securing GMP within the meaning of the Pension Schemes Act 1993

And they also then ask whether the scheme "will revalue the GMP at Fixed Rate or Section 148 Orders".

But are you saying I could, in theory, take all the CETV as a lump sum (less tax) and have no GMP at age 65?

tarbat · 27 June 2019 at 9:11PM

Brynsam wrote: »

If you are looking at transferring out with a CETV of £30,000+, you'll need to take advice (mandatory - could cost around £5K or more) and there are strict deadlines you'll need to meet - the clock is already ticking, so you need to crack on immediately if you are considering a transfer.

Yes, as I've said, I'm seeing my advisor tomorrow, but I'm just getting prepared. What clock is ticking? Is there some sort of deadline I've not realised about, other than National Grids 3 month limit on the validity of the CETV?

hyubh · 27 June 2019 at 9:20PM

Goldiegirl wrote: »

I'm also wondering if I have to take the pension at 60, or if I can defer, as I'll be missing out on 5 years of uprating if I take it earlier than the male GMP age

Once you reach GMP age for your sex, the GMP stops revaluing and you are due statutory increases (so, zero given your GMP is all pre-88) + the statutory late retirement factor for GMP if you defer (1/7% per week).

This is quid pro pro, sort of, from having accrued the GMP in the first place at a faster rate than a man of the same age.

xylophone · 27 June 2019 at 9:29PM

I have to say that I am very puzzled.

This is the proposed transfer of a safeguarded benefit. It is a GMP not a GAR.

The value of your benefits is in excess of £30,000 so that you will need to take (and pay for) the advice of a Pension Transfer Specialist

The CETV of the ceding scheme is presumably considered enough to meet the full GMP liability.

Can you or can you not transfer to a personal pension?

Or are National Grid saying that you can only transfer to a S32 type policy (which has its own restrictions) or to another DB Scheme?

https://www.financialadvice.net/s32_buy_out_plan/zone/1288

enthusiasticsaver · 28 June 2019 at 12:44AM

Goldiegirl wrote: »

I've read this thread with interest, as I have a GMP only pension for my service with Barclays 1978 - 81.

I was aware that there was no obligation for them index link the pension once in payment, but I wasn't aware that it may be possible to take a cash lump sum. I suppose that also means I could transfer the lump sum into my SIPP.

I haven't heard anything from Barclays since I left in 1981. but they wouldn't be able to trace me as I got married after I left them.

I can take my GMP pension when I'm 60, so I will contract the scheme administrators in the new year as I'm 60 next March.

I'm also wondering if I have to take the pension at 60, or if I can defer, as I'll be missing out on 5 years of uprating if I take it earlier than the male GMP age

I have a GMP pension with Barclays from 1978 to 1985 and an due to get it next February when I am 60. You can go on to the Towers Willis Watson site who are the administrators and get a transfer value as I am in the process of doing this through an IFA. Not sure whether it is worth deferring after 60 though. It is your responsibility to claim it and keep them informed of change of name/address so I don't think they will be trying to trace you.

Deferred GMP only pension and early retirement

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