GMP and deferred pension

enthusiasticsaver · 31 August 2018 at 4:10PM

xylophone wrote: »

No - the pension (which consists solely of GMP) is still in deferment. See post 63.

In these circumstances, if Enthusiastic saver has her statement of deferred benefits at leaving, presumably she can estimate the pension at age 60 as it is revaluing at fixed rate of 8.5%.

Indeed I have done this and it was confirmed in 2013 by Barclays Pension services. Towers Watson are more reluctant to confirm although they were happy to give me the formula to work it out. You are right in that my pension is deferred. I cannot draw on it until 2020.

enthusiasticsaver · 31 August 2018 at 4:16PM

DT2001 wrote: »

Enthusiasticsaver - You have drawndown your pension?
Do you have the figure for your GMP portion as I did the calculation to my GMP age and got it checked by TPAS.
WTW will not commit because legislation may change or the Trust Rules could be altered. Not sure how likely but that is the reason given.
As you say once in payment no increases but at SPA I think you’ll not have a deduction as the Trust Rules state that the GMP figure will be the minimum paid. Mike F sent me the rules and variations up to 1995 and I cannot see any variation to that commitment. Additionally the GMP figure will have been agreed by HMRC reconciliation (?) so cannot hopefully be altered.

I do have the GMP figure and have worked it out with the 8.5% increases. I have been told it is up to HMRC as to what happens when I get my state pension. Luckily this is not my main pension so I have not used it in my retirement plans so when I eventually get it it will be a bonus. Hopefully I won't get a reduction when I reach SPA but as TPAS and TW have both been fairly non committal (understandable with government constantly changing goal posts on pensions) I am reluctant to build this particular pension into my drawdown plans.

It is due for drawdown in 2020. It is in deferment at the moment.

MikeFloutier · 31 August 2018 at 7:24PM

xylophone wrote: »

From NHS

Your GMP amount is broadly equivalent to what you would have received if you had been in the State Earnings Related Pension Scheme for that period of service.

So, had I remained in SERPS (giving me an amount "broadly equivalent" to GMP), how much would my final salary scheme (1/60th) pension be reduced?

Sure I would have missed out on my 1.4% NIC rebate but...

xylophone · 31 August 2018 at 8:21PM

Remember that in a deferred public service scheme, the GMP would revalue by Full Rate in deferment.

https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

I suppose that Pension Schemes had the right to choose to remain contracted in so that employers and employees would have been required to pay the requisite NI contributions.

It is conceivable that the employers would have chosen to reduce contributions to the occupational scheme/require employees to make higher contributions / increase the rate of clawback/abatement/state pension reduction...who knows?

I think we all have to accept that the COSR Scheme became the norm after SERPS was introduced and that the GMP is part of the occupational pension.

MikeFloutier · 31 August 2018 at 9:02PM

xylophone wrote: »

I think we all have to accept that the COSR Scheme became the norm after SERPS was introduced and that the GMP is part of the occupational pension.

I completely agree.

However it is vital that we can be sure how large a "part of the occupational pension" the GMP is.

The Pensions Management Institute produce a publication titled "Pension Terminology".

In it Anti-Franking is defined as:

ANTI FRANKING REQUIREMENTS
Anti franking legislation requires that statutory indexation of an individual's [Guaranteed Minimum Pension (GMP)] is paid in addition to any amount by which the scheme benefits exceed the GMP, and is not deemed to be covered or "franked" by other scheme benefits.

The requirements are covered in Chapter III of Part IV PSA93 and if brought into force Part II of Schedule 5 of the Child Support, Pensions and Social Security Act 2000.

This helpful publication is sponsored by a certain firm going by the name of Willis Towers Watson.

xylophone · 31 August 2018 at 9:07PM

This helpful publication is sponsored by a certain firm going by the name of Willis Towers Watson.

Ironic, innit?:)

MikeFloutier · 1 September 2018 at 12:04PM

Ok, so, the next step for me, (unless there is someone else reading this who is in the same position but reaches GMP date/age earlier than 3/2/2019) is to await WTWs calculations which are due 4-8 weeks earlier; i.e. Around the New Year.

One final (pro-tem) check for my peace of mind was to calculate what I would have received as a pension (Barclays FS + SERPS) had I not contracted out. A sort of bench-mark.

I took my 1/60th figure (at leaving), £7279.55 and applied RPI increases from Leaving until GMP date. (Not exact and I guess it should have changed to CPI at some point; someone will know). The resultant figure was £13732.14.

I then wanted to calculate what my SERPS figure would have been. I didn't have my salary figures available so I decided to look at my State Pension Forecast. I saw that my State Pension could have been a maximum of £155.65pw but that it had been reduced to £127.93pw due to being contracted out.

The difference, £27.72pw, I am taking to represent the SERPS pension forgone due to CO. This is £1441pa and when added to my non-CO Barclays pension, revalued to £13,732.14 equals £15,011.14.

This is clearly much less than the WTW estimate of £18,042.81 contained in post #136 in my big thread. And bear in mind that the WTW estimate includes two separate instances of Franking; i.e. The original GMP, at leaving, and the clawing back of the normal pension increases between NRA & GMP date.

The total value of Franking in my case is the sum of these two items, i.e. £1802.84 + £1380.05 = £3182.89

All this begs the question "why on earth were the GMP revaluation rates so high"?

WTWs estimate of my revalued GMP (post partial franking) is very nearly 600% higher than the amount by which the State has reduced my State Pension due to being contracted out!

Anyway, if no one comes forward with some GMP date actuals in the next 4 months for us to chew on I'll report back around Christmas.

MikeFloutier · 1 September 2018 at 12:10PM

Finally, I'm conscious of the fact that I have rather selfishly hijacked DT2001s original question concerning the Franking of deferred pensions drawn prior to NRA. (If I've got that right)

I'm sorry about this Tony, I got a bit carried away.

xylophone · 1 September 2018 at 1:00PM

Have you had a look at this?

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension

MikeFloutier · 1 September 2018 at 4:56PM

xylophone wrote: »

Have you had a look at this?

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension

And this is State Pensions for Dummies!

I have to take my hat off to you guys here at MSE.

I have struggled over a long period to try to understand all this and, to be honest, I think I have failed.

For example I downloaded The Pension Schemes Act 1993 (c.48) Chapter lll, sections 87-92 which is titled PROTECTION OF INCREASE(S) IN GUARANTEED MINIMUM PENSIONS ("ANTI-FRANKING")

I read it a few times but failed to understand it and in the end simply accepted that it probably says the same as my Barclays 1964 scheme rules. In this case Appendix 1, section 7. Anti-Franking simply says:

...no part of a Member's...pension under the scheme may be used to frank an increase in the...GMP

As I say, I take my hat off to you all. Without your help, advice and encouragement we would almost definitely be missing out on parts of our pensions.

Thank you!

GMP and deferred pension

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