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  • FIRST POST
    • MikeFloutier
    • By MikeFloutier 9th Aug 13, 1:16 PM
    • 214Posts
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    MikeFloutier
    Barclays Final Salary pension GMP/Excess revaluation & Anti-franking
    • #1
    • 9th Aug 13, 1:16 PM
    Barclays Final Salary pension GMP/Excess revaluation & Anti-franking 9th Aug 13 at 1:16 PM
    Hi,

    I'm six months away from my NRD (3 Feb 2014), having left my employer (final salary scheme, opted out of Serps - Barclays) on 31 Dec 1994 after 21 years and some months.

    I had been tracking my likely pension via their web-site illustration system - whilst figuring out what to do at NRD.

    Now I get their written illustration and the headline figure (i.e.. pension with no TFLS) is 11,025 (let's call this "A"). This is very different to the 14,209 (let's call this "B") I was led to expect by their illustration system.

    I've spoken to them and the difference is as follows:

    A is taken from an illustration titled "Normal retirement statement on 3 Feb 2014, whereas,

    B is taken from an illustration titled "Early retirement statement on 31 Jan 2014, i.e. 3 days earlier.

    Their explanation of the big difference is that with A, the GMP portion is not paid until my State Pension Date, whereas with B the GMP (or a representation of it) is paid from what would technically be my Early retirement date (i.e. 3 days before my NRD.)

    This seems a good and valid explanation of what, at first sight, doesn't make a lot of sense.

    OK, so my next question to them is, "how much will my GMP portion be (approximately??) at my SPD if I opt for taking my pension at my NRD, i.e. option A above."

    Obviously I need to know this to make a sensible comparison of these two options - ignoring the other issues fttb.

    Their answer is that, "we can't tell you that as the government let us know the figure at your State Pension Date"

    At this stage I realise I need to do some digging re GMP, about which I know next to nothing, and so I tell them this.

    Looking at the documents I've received from Barclays as recently as June 2011, I can see reference to the fact that the "GMP portion of your deferred pension is 1,802.84" They also say that, "The GMP portion of your pension has not been increased but will be increased at age 65".

    They enclose a guide showing how the GMP portion will be increased which says, "Any GMP element has increased each April; the rate being determined by the date you left the scheme."

    I left the scheme on 31 Dec 1994 which equates to a rate of 7%.

    My question is, can I calculate what my GMP portion will be at age 65 (+ some months, as I believe it now is)?

    Many thanks for your help with this.

    Kind regards,

    Mike
    Last edited by MikeFloutier; 15-09-2013 at 5:20 PM. Reason: Title change
Page 1
    • xylophone
    • By xylophone 9th Aug 13, 3:00 PM
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    xylophone
    • #2
    • 9th Aug 13, 3:00 PM
    • #2
    • 9th Aug 13, 3:00 PM
    http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/
    http://www.barnett-waddingham.co.uk/news/2012/07/revaluation-for-early-leavers/

    "The revaluation period for GMPs is the number of complete tax years between a member's date of leaving and their GMP Pension Age. For members retiring before they reach GMP Pension Age, the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates."

    I believe that the Barclays Scheme used Fixed Rate - if so, it would be 7% in your case?

    You reach SPA in 2019? See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf


    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181229/single-tier-pension.pdf
    Last edited by xylophone; 09-08-2013 at 3:03 PM.
    • MikeFloutier
    • By MikeFloutier 10th Aug 13, 8:28 AM
    • 214 Posts
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    MikeFloutier
    • #3
    • 10th Aug 13, 8:28 AM
    GMP revaluation query
    • #3
    • 10th Aug 13, 8:28 AM
    Many thanks Xylophone,

    Looking at the Barnett Waddingham, "early leavers" page, there is a paragraph that I found ambiguous. It says:

    "The revaluation period for GMPs is the number of complete tax years between a member's date of leaving and their GMP Pension Age. For members retiring before they reach GMP Pension Age, the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates. "

    My circumstance is that I'm "retiring" 5 years before my GMP pension age. In this situation Barnett Waddingham say that: "the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates."

    I'm unclear as to which two dates they are referring to. Presumably it's: 1. date of leaving, and 2. "retirement". Is this the case?

    I guess my only other question would be: "Is the revaluation a cumulative affair OR is it simply a matter of adding 7% (in my case) each year?

    Many thanks!
    • xylophone
    • By xylophone 10th Aug 13, 12:26 PM
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    xylophone
    • #4
    • 10th Aug 13, 12:26 PM
    • #4
    • 10th Aug 13, 12:26 PM
    "The revaluation period for GMPs is the number of complete tax years between a member's date of leaving and their GMP Pension Age.
    The early leavers.

    For members retiring before they reach GMP Pension Age, the revaluation period for GMPs would normally be the number of 6 Aprils between the two dates. "
    For example men who stayed with the company until scheme pension age at 60 and retired but did not reach GMP age (65) for another five years.

    The 7% is compound - you might find a PM to Snow Man helpful - he is a whizz on GMP. http://forums.moneysavingexpert.com/showthread.php?t=4549283&highlight=gmp+revaluation see post 10.
    • MikeFloutier
    • By MikeFloutier 10th Aug 13, 1:23 PM
    • 214 Posts
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    MikeFloutier
    • #5
    • 10th Aug 13, 1:23 PM
    • #5
    • 10th Aug 13, 1:23 PM
    Thanks Xylophone, it makes sense now.

    I was thinking the text I quote differentiated between normal leavers and early leavers whereas it was actually just reiterating the principal of GMP revaluation and then applying it to an early leaver.

    So, to summarise my position, what I think you are inferring is that my GMP (1802 at leaving on 31/12/94) will be revalued each April 6 at a rate of 7% (as per scheme rules), compounding until the April before my 65th birthday (approx) - i.e. 6 April 2018.

    This would be 24 years which by my reckoning would give me a GMP of 8591.

    If this is correct, then it would seem sensible for me to hold out for this in 5 years time rather than taking it now at a much lower rate - they are offering me an extra 3,200pa on top of my Excess portion of 11,000 as an alternative.

    The cross-over point appears to be around age 68.

    I guess my next question is: "Does my GMP portion continue to benefit from revaluations once it is in payment at 65?"

    Thanks again!
    • xylophone
    • By xylophone 10th Aug 13, 4:31 PM
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    xylophone
    • #6
    • 10th Aug 13, 4:31 PM
    • #6
    • 10th Aug 13, 4:31 PM
    http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/

    See GMP in Payment - but see also http://forums.moneysavingexpert.com/showthread.php?t=4532605&highlight=gmp+revaluation post 12 and 13 - Post 13 refers to

    http://webcache.googleusercontent.com/search?q=cache:rZgVz5VexKsJ:www.pensions-ombudsman.org.uk/determinations/docs/2008/aug/s00105.doc+&hl=en&gl=ukYou might be interested in this as it concerns Barclays.

    http://forums.moneysavingexpert.com/showthread.php?t=4532605&highlight=gmp+revaluation &page=2 post 21 and what follows

    The above cover the current position. But you will reach GMP/SPA age under the new single tier pension.

    See links in my previous post concerning the single tier pension and also https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/209092/foi-1816-2013.pdf

    And do try Snow Man who is very knowledgeable. http://forums.moneysavingexpert.com/showthread.php?t=4509161&page=1 post 6
    Last edited by xylophone; 10-08-2013 at 8:46 PM. Reason: addition
    • MikeFloutier
    • By MikeFloutier 11th Aug 13, 6:46 AM
    • 214 Posts
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    MikeFloutier
    • #7
    • 11th Aug 13, 6:46 AM
    • #7
    • 11th Aug 13, 6:46 AM
    Thanks Xylophone, I have written to SnowMan as you suggest.

    I'm gradually starting to make sense of this morass of information, almost all of which is new to me.

    I guess the most important thing in all this is to be able to see which part of it is most important and focus on this fttb.

    My feeling is that the important decision (ignoring the TFLS aspect) is whether to select option A or B as offered by my Scheme. (see post 1).

    Therefore my simple question - and I'm really looking for a Yes or No here (please, no more links fttb - no offence, they are very informative and targeted) - is:-

    If I opt for A, (ie Normal retirement and a lower initial (excess) pension) will they definitely pay my full GMP (i.e. 1802 compounded at 7% pa over 24 years making 8591) at age 65 (approx).
    • xylophone
    • By xylophone 11th Aug 13, 2:33 PM
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    xylophone
    • #8
    • 11th Aug 13, 2:33 PM
    • #8
    • 11th Aug 13, 2:33 PM
    I am finding it difficult to get to grips with this because at Scheme Retirement Date, when you bring your pension into payment, the pension should include the GMP and thereafter the whole of your pension should increase according to your scheme rules until you are 65- when you are 65 you will be given the final figures for your pre and post GMP which are the amounts used to calculate your scheme pension increases thereafter.

    For example, let us suppose that at 65 your pension is say 20,000 per annum of which 3000 is pre 88 GMP and 1000 is post 88 GMP - then Barclays will pay no increase on 3000, up to 3% depending on inflation on 1000 and whatever the scheme rules indicate on 16000?

    Incidentally, it might be worth establishing whether the Barclays Scheme practises abatement at SPA ( a reduction in Scheme Pension to take account of the fact that you are receiving State Pension).

    I am hoping that Snow Man can clarify your situation.
    • MikeFloutier
    • By MikeFloutier 11th Aug 13, 5:25 PM
    • 214 Posts
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    MikeFloutier
    • #9
    • 11th Aug 13, 5:25 PM
    • #9
    • 11th Aug 13, 5:25 PM
    Thanks Xylophone,

    I think I understand the Increases bit now. Regarding the State pension reduction figure, they have already advised my of this.

    They are quite clear in stating that the GMP will not be paid until 65; this seems reasonable as it's intended to replace the SERPS Additional Pension which would naturally not be payable until 65 - that's my understanding anyway.

    My real question remains (assuming my GMP is payable at 65): Is there any reason why I shouldn't expect to get 8591 pa GMP, as calculated in post 7?
    • mania112
    • By mania112 11th Aug 13, 5:47 PM
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    mania112
    Firstly, are we talking about either retiring at age 65 or 3 days earlier (the A versus B shown in the first post)?

    In any case: When you turn 65, a GMP will be paid.

    That's the only fact you need to be concerned with, really.

    If your reduced pension for retiring early was 5,000, the 5k is calculated to ensure once you hit 65 it has grown to be at least the GMP.

    GMP is the guaranteed minimum pension (as you know), so it's the minimum the pension must be at 65. At that's all.

    EDIT: And so if GMP can not be met by retiring early, they wouldn't let you do it (unless you were at 'deaths-door')

    If normal retirement is way in excess of the GMP, it's clearly irrelevant that there's a guaranteed minimum.

    If you retire early the pension at 65 still needs to be at least equal to the GMP proportion.

    What GMP isn't, is an additional amount. It's normally a total pension (of which GMP is x).
    • xylophone
    • By xylophone 12th Aug 13, 9:41 AM
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    xylophone
    Even if a deferred pensioner brings his deferred pension into payment before his Scheme Retirement Date ( and in that case usually (but not always, depending on any special arrangement the Scheme might make) suffering an actuarial reduction), the pension he is paid includes the GMP- in a sense, it is only at GMP age (which always used to be and in your case still is State Pension Age) that the GMP becomes an important consideration because of the way that pension increases are paid after that point.

    The GMP is not an addition to your Scheme Pension but part of it unless Barclays have some other type of arrangement which does not appear to be the case judging by the Ainsworth case to which I refer in post 6, and which also mentions the abatement (nothing to do with GMP) which Barclays still seem to impose.
    • MikeFloutier
    • By MikeFloutier 12th Aug 13, 10:16 AM
    • 214 Posts
    • 75 Thanks
    MikeFloutier
    Thanks Xylophone,

    That's makes sense of Their illustrations (both without TFLS):

    A = 14,209 (scheme retirement date - 3 Feb 2014), and
    B = 11,025 ("early retirement" date - 31 Jan 2014)

    And yes, Barclays do impose the Abatement which in my case is 672.49 pa.

    OK, I know I keep banging on about this, but because it's so crucial in my decision as to whether to opt for A or B, can you say whether my GMP calculation is correct: i.e. from a GMP of 1802 (on leaving the scheme on 31 Dec 1994) with an fixed revaluation figure of 7% pa I would get 8591 in payment at 65???

    Is there any reason you are aware of, that I may be overlooking, as to why this would not be the case; it's just that I was not aware of GMP revaluation prior to beginning this thread and the figure is obviously much larger than I was expecting (albeit payable 5 years later than I expected)

    Many thanks!
    • xylophone
    • By xylophone 12th Aug 13, 10:27 AM
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    xylophone
    Firstly, are we talking about either retiring at age 65 or 3 days earlier (the A versus B shown in the first post)?
    No, as far as I can see the OP is talking about his deferred FS pension with Barclays.

    It would appear that the normal retirement age for the Scheme was age 60 (virtually the norm for this type of Scheme) and the OP reaches his Normal Retirement Date for the Scheme on 3 Feb 2014.

    This would usually mean that the OP could take his full deferred pension without actuarial reduction.

    That pension would [B]include the GMP[/B- thereafter, Barclays would increase the whole of the pension in accordance with their Scheme Rules until the OP reached GMP age which in his case means virtually State Pension Age.

    For example, suppose the Scheme pension at age 60 was 10000 per annum and the Scheme Rules stated that pensions would be increased by RPI as at December each year. That 10000 includes the GMP. At this point the Scheme Administrator should be able to give him the figures for his pre 88 GMP (x), his post 88 GMP (y) and the excess(z). Then x + y+ z =10000.

    The first December after age 60 RPI is 5% - therefore the pension becomes 10500 per annum. The 10500 will increase by RPI at the next December and so on until the December after the pensioner reached 65. Let us suppose at this point that the pension has reached 12,000 per annum and of that 12000, the amount of pre 88 GMP has now reached 2000 (x) and post 88 750 (y) so that z (the excess) is now 7250.

    Then the Scheme pays no increase on 2000, up to 3% or CPI inflation (whichever is the lesser of the two) on 750 and RPI inflation on the balance.

    The point is that the GMP is always included in the pension at the date it is taken, it is not in addition to it.

    What seems to me to be odd is that the OP has been quoted a pension amount that is 3000 higher three days before his NRD and then that Barclays seem to be telling him (whichever of these figures is correct) that the GMP as calculated at his NRD is not within the amount.
    I used to think that I understood GMP pretty well, but I confess to being utterly flummoxed and am hoping that Snowman can throw some light.
    Last edited by xylophone; 16-08-2013 at 11:10 AM. Reason: add virtually
    • mrschaucer
    • By mrschaucer 12th Aug 13, 11:04 AM
    • 622 Posts
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    mrschaucer
    [QUOTE=MikeFloutier;62809417]Thanks Xylophone,

    That's makes sense of Their illustrations (both without TFLS):

    A = 14,209 (scheme retirement date - 3 Feb 2014), and
    B = 11,025 ("early retirement" date - 31 Jan 2014)

    QUOTE]

    Mike, you've now transposed the two figures from the original post, which were flummoxing people. Can you confirm which figures go with which retirement option?
    • MikeFloutier
    • By MikeFloutier 12th Aug 13, 11:19 AM
    • 214 Posts
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    MikeFloutier
    Gosh, sorry Mrs Chaucer, you are so right, it should have read:

    A = 11,025 (scheme retirement date - 3 Feb 2014), and
    B = 14,209 ("early retirement" date - 31 Jan 2014)

    I spoke to the administrators on the phone but they couldn't explain the difference, although they said it related to the GMP portion. They have promised to write explaining in full; something I'm waiting for.

    Good spot, thank you!
    • SeekTruth
    • By SeekTruth 12th Aug 13, 2:12 PM
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    • 120 Thanks
    SeekTruth
    ...

    In any case: When you turn 65, a GMP will be paid.

    That's the only fact you need to be concerned with, really.

    If your reduced pension for retiring early was 5,000, the 5k is calculated to ensure once you hit 65 it has grown to be at least the GMP.

    GMP is the guaranteed minimum pension (as you know), so it's the minimum the pension must be at 65. At that's all.

    EDIT: And so if GMP can not be met by retiring early, they wouldn't let you do it (unless you were at 'deaths-door')

    If normal retirement is way in excess of the GMP, it's clearly irrelevant that there's a guaranteed minimum.

    If you retire early the pension at 65 still needs to be at least equal to the GMP proportion.

    What GMP isn't, is an additional amount. It's normally a total pension (of which GMP is x).
    Originally posted by mania112
    Apologies if this is confusing the issue, but doesn't the Anti-Franking legislation mean that the pension at SPA will be more generous than implied by mania112?

    I think that I understand the impact of Anti-Franking on the pension calculation for someone who, for example, leaves a pension scheme early and then takes the deferred benefits on reaching SPA. I definitely do not understand the impact on someone who leaves a pension scheme early, leaves the benefits deferred for a period and then takes them before SPA. If anyone can explain the latter case to me in words of one syllable and with worked examples then I'd be grateful!
    • MikeFloutier
    • By MikeFloutier 12th Aug 13, 4:33 PM
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    MikeFloutier
    Ok, I'd really like to get back to basics here if we can; it's got too complicated

    Let's just assume that I want to take my Barclays FS pension at Normal Retirement Date and I don't want a TFLS.

    I left the scheme on 31 Dec 1994 and "retire" on 3 Feb 2014.

    My GMP portion (at Leaving) is stated to be, 1802 and it's also stated that this will be revalued at a fixed rate of 7% at GMP payment date. I now think this equates to a figure of 7989

    I have a statement from Barclays that says "Total scheme pension at retirement, 11,025". (subject to a deduction of 672 at SPA).

    My feeling is that this is a fairly normal situation, I'm not asking about increases when the pension is in payment so please ignore that.

    OK, all I want to know is, what will they pay me at Retirement AND, what will they pay me at SPA/GMP age (ie 65). Could you possibly give me a worked example from my figures?

    I just have a slight concern that I might be labouring under a misapprehension about some aspect of this - e.g. Increases to my GMP portion may not actually increase my overall pension.
    • mania112
    • By mania112 12th Aug 13, 5:19 PM
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    mania112
    Ok

    At retirement Barclays have estimated for you that your total pension will be 11,025 - that includes the GMP portion which becomes 'valid' for want of a better word at 65.

    As you can see at SPA the pension from Barclays goes DOWN, not up.

    The deduction at SPA is known as a 'bridging pension' which means Barclays give you a bit extra to 'tide you over' until such time as your basic state pension kicks in.

    The overall figure INCLUDES a proportion of which which is made up of GMP as a result of contracting out.
    • MikeFloutier
    • By MikeFloutier 12th Aug 13, 7:41 PM
    • 214 Posts
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    MikeFloutier
    Ok, I've certainly learnt a lot in the last few days. At first I have to admit being slightly irritated by the deluge of links in place of straight answers However, as I've assimilated some of the info I've begun to see the wisdom of this and to appreciate the time and trouble taken to know about these links and, more importantly, to know which are relevant to me. Thank you!

    For the time being, I'm going to wait for Barclays' (Tower Watson's) response to my query about why my Normal Retirement Illustration is 3,200 less than a (3 day earlier) Early Retirement Illustration.

    I'm also hoping to hear from the legendary SnowMan.

    I'll post again when more is known.

    PS. One last question, is it fair to say that, "IF one's FS pension (at retirement) is greater than one's revalued GMP, THEN, even if the said GMP suddenly ceased to exist, the value of the FS pension would remain unchanged (ignoring the effect of any post-retirement increases)???"

    Do you see, since the GMP seems to be the thorn in our sides, I'm trying to establish whether my GMP has any relevance at to me at all.
    • mrschaucer
    • By mrschaucer 13th Aug 13, 6:28 PM
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    mrschaucer
    This is continuing to make my head hurt, but is most intriguing. I think the options you have in front of you at the moment equate to comparing apples and pears - one quote including the theoretical gmp portion as at Jan 14 (but not telling you what it is) and one quote without the gmp as at Feb 14, telling you it will be paid later ...
    (By the way, I don't think I agree with your calculation of gmp at age 65 - if you are right and the figure of 1802 is revalued at 7% each April making 24 years-worth of revaluing, then if you compound that up you get to somewhere in the region of 9140. Google a compound interest calculator.)

    By Jan/Feb 2014, the gmp element (originally 1802) would theoretically have been revalued over 18(?) years, giving a figure of 6090 ish. So now you can compare the two offerings a bit more sensibly:

    Early retirement Jan 14 at 14209 (including a gmp of 6090) which is the same as:
    Early retirement Jan 14 at a theoretical 8119 without gmp

    Compared with
    Normal retirement Feb 14 at 11025 without gmp.

    So that helps a bit. It doesn't solve your problem as to which to choose, however.

    Early retirement: 14209 with increases to 65 governed by whatever the scheme rules say about early retirement increases. (So 14209 plus x.) At 65 you get a letter from the pension scheme outlining your pre-and post 88 gmp figures (totalling for the sake of argument 9140) and the Excess amount, (which will therefore be 14209 plus x minus 9140) all of which will then be treated differently as far as increases are concerned (see earlier posts and links). At some stage (age 65 or SRD?) you give up your 672 back to Barclays, and at your State Retirement Date you qualify for your state pension.

    Normal retirement: 11025 with increases to 65 governed by whatever the scheme rules say about normal retirement increases. (So 11025 plus y.) At 65 you get your long awaited GMP, so 11025 plus y plus 9140. You get the same letter as above from the pension scheme outlining pre-and post- 88 gmp amounts totalling 9140, BUT the Excess will obviously be different (11025 plus y minus 9140). Again, you give up your 672 at whatever stage and qualify for your state pension at SRD.

    Whatever you do, the gmp amount is a constant which has to keep revaluing at 7% until you are 65 (whatever increases are applied to your early retirement pension of which it could form part, note) and ends up at the same amount in either scenario.

    Like others I'm at a loss to understand why they would "include" gmp in the early retirement quote and "exclude" it in the normal one apart from the scheme rules having been written in this very arcane way. Please come back and fill us in on any other info gleaned when you get your reply!
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