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  • FIRST POST
    • kuepper
    • By kuepper 2nd Aug 18, 9:32 PM
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    kuepper
    Bit baffled by Guaranteed Minimum Pension
    • #1
    • 2nd Aug 18, 9:32 PM
    Bit baffled by Guaranteed Minimum Pension 2nd Aug 18 at 9:32 PM
    Had state pension since 2013 and also had a pension from working in local govt


    I realised this year that my personal local govt pension annual increase was less than the 3% quoted. When I queried this I was told the balance to make it up to 3% was paid by the state as part of my state pension and this had been part of the 2016 changes. This didn't sound right and I asked for a fuller explanation.



    After various exchanges I was sent the link below which purportedly "details responsibilites on funds for increases in pensions during the period of contracting out i.e. when you paid into the fund for any period during 1978 to 1997." Those dates include my 16 years service. The text the link takes you to is parliamentary gobbledegook to me. Can anyone explain this briefly in language a lay person would understand so I know if i'm being treated right? Thanks!


    https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN04956#fullreport
Page 2
    • Silvertabby
    • By Silvertabby 6th Aug 18, 11:40 AM
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    Silvertabby
    There aren't any 'standard' letters in use throughout the LGPS, even for GMP.

    The LGPS I worked for certainly didn't split the figures into excess/pre 88 GMP/post 88 GMP in the retirement letters. To be fair, very few people actually queried the pension increase figures if/when they were less than CPI - and the one's who did seemed happy with a quick verbal explanation.

    We had more trouble with the NI Modification letters, which explained that the pension had been reduced by a small amount (rarely more than 3 per month) when the State pension included an amount of Graduated Pension - even though the pensioner had paid reduced NI for that period.

    As xylophone says, I'm sure OP's LGPS administrators will be happy to confirm his current GMP breakdown.

    In the meantime, OP, be glad that you reached SPA before 2016 - the GMP question for those of us who will reach/reached SPA after that date is so much more complicated!
    • kuepper
    • By kuepper 6th Aug 18, 5:26 PM
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    kuepper
    "In the meantime, OP, be glad that you reached SPA before 2016 - the GMP question for those of us who will reach/reached SPA after that date is so much more complicated!"


    Not sure about that, if I'd reached SPA since april 2016 my state pension would be at least 164.35 which is ~10 a week more than I get
    • greenglide
    • By greenglide 6th Aug 18, 5:32 PM
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    greenglide
    .... And reached SPa just after the change which means that the GMP on my LGPS pension is ignored and the full amount of the pension is indexed. My SP is greater than the nSP maximum so I get the protected payment and there is no GMP/COD there either.


    So I win hands down but I don't think the system is at all fair.
    • Silvertabby
    • By Silvertabby 6th Aug 18, 5:37 PM
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    Silvertabby
    "In the meantime, OP, be glad that you reached SPA before 2016 - the GMP question for those of us who will reach/reached SPA after that date is so much more complicated!"
    Not sure about that, if I'd reached SPA since april 2016 my state pension would be at least 164.35 which is ~10 a week more than I get
    Er - not necessarily - you have some contracted out service (ie, paid reduced NI) and the new 164.35 is only for those who paid full, unreduced, NI for 35 years.


    I won't get my State pension until I'm 66 (although I retired at 60) and my current forecast is way short of 164.35 because my entire pensionable service was contracted out. Please don't think that I'm complaining because I'm certainly not - the difference between my actual State pension and the new single tier pension is already being paid as part of my occupational pensions.
    • xylophone
    • By xylophone 6th Aug 18, 5:59 PM
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    xylophone
    and the new 164.35 is only for those who paid full, unreduced, NI for 35 years.
    Again, not necessarily.

    It would be possible for a person to have been contracted out for some part of their employment and yet qualify for the full new state pension and even a protected payment like Greenglide above.

    And some people in public service schemes reaching SPA in the new system are in a privileged position regarding GMP.

    Some in public service schemes were in a slightly privileged position even under the old system - women's GMP age is 60 (and that is the age at which schemes would do the pre88/post88/excess calculation to determine pension increases).

    However, with the increase in SPA, the public service schemes delayed doing the split until SPA was reached.

    With regard to the new state pension, although the calculation re deduction for contracting out will have been done at 6/4/16, once the starting amount is established , the whole of that up to the new state pension amount will increase by the triple link.

    The Public Service Scheme will not split out the GMP either at GMP age or state pension age.

    Therefore the whole of the scheme pension will continue to be index linked by the scheme for the rest of the pensioner's life.

    https://www.prospect.org.uk/news/id/2018/January/22/Public-sector-pension-scheme-members-get-full-inflation-protection

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/675360/Indexation_and_equalisation_of_GMP_in_public_servi ce_pension_schemes_government_response_web.pdf
    Last edited by xylophone; 06-08-2018 at 10:39 PM. Reason: added 'some" to take note of undecided post 2021 position see silvertabby post below
    • kuepper
    • By kuepper 6th Aug 18, 6:33 PM
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    • 112 Thanks
    kuepper
    "Otherwise, I can only suggest that you ask your LGPS administrator to explain your figures."

    I did but they only sent me that link that I didn't understand and which I started the thread with!
    • Silvertabby
    • By Silvertabby 6th Aug 18, 7:08 PM
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    Silvertabby
    "Otherwise, I can only suggest that you ask your LGPS administrator to explain your figures."

    I did but they only sent me that link that I didn't understand and which I started the thread with!
    Originally posted by kuepper

    You need to ask them for your actual (current) GMP figures, split into pre and post 88.
    • hyubh
    • By hyubh 6th Aug 18, 7:25 PM
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    hyubh
    The Public Service Scheme will not split out the GMP either at GMP age or state pension age.
    Originally posted by xylophone
    Not quite technically correct. The GMP is still formally 'split out', but since AP<GMP, the difference between the GMP increase and full PI is added back on.

    Since pensions software for LGPS (and other public sector schemes) will have needed to be coded for AP<GMP cases in the past, strictly speaking there's no change to the calculation... AP<GMP just happens to apply to every case where GPD>5/4/16, whereas for older cases, it's a relatively rare (and usually only temporary) situation.
    • xylophone
    • By xylophone 6th Aug 18, 7:58 PM
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    xylophone
    I did but they only sent me that link that I didn't understand and which I started the thread with!
    See Post 18

    Otherwise, ask LGPS to set out your personal situation as it is set out for Tim in the example.
    • Silvertabby
    • By Silvertabby 6th Aug 18, 10:08 PM
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    Silvertabby
    Again, not necessarily.

    It would be possible for a person to have been contracted out for some part of their employment and yet qualify for the full new state pension and even a protected payment like Greenglide above.

    And people in public service schemes reaching SPA in the new system are in a privileged position regarding GMP.

    Some in public service schemes were in a slightly privileged position even under the old system - women's GMP age is 60 (and that is the age at which schemes would do the pre88/post88/excess calculation to determine pension increases).

    However, with the increase in SPA, the public service schemes delayed doing the split until SPA was reached.

    With regard to the new state pension, although the calculation re deduction for contracting out will have been done at 6/4/16, once the starting amount is established , the whole of that up to the new state pension amount will increase by the triple link.

    The Public Service Scheme will not split out the GMP either at GMP age or state pension age.

    Therefore the whole of the scheme pension will continue to be index linked by the scheme for the rest of the pensioner's life.


    https://www.prospect.org.uk/news/id/2018/January/22/Public-sector-pension-scheme-members-get-full-inflation-protection

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/675360/Indexation_and_equalisation_of_GMP_in_public_servi ce_pension_schemes_government_response_w
    eb.pdf
    Originally posted by xylophone

    At the moment, only those public sector pensioners who reach SPA before April 2021 get full protections. Mr S is ok, but I don't reach SPA until 2022. I think the theory behind this decision is that 'us youngsters' have the benefit of being able to increase our pensions from the old basic State pension to the full single tier pension by working/paying NI from 2016 onwards. But I retired in 2016, at 60, and can only improve my State pension by paying voluntary contributions.


    That said, it looks like the powers that be are still considering the position of post 2021 SPA'ers. Will just have to wait and see what happens.
    Last edited by Silvertabby; 07-08-2018 at 11:34 AM.
    • xylophone
    • By xylophone 6th Aug 18, 10:26 PM
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    xylophone
    But I retired in 2016, at 60,
    I had not realised that you are still a "bright young thing"!

    That said, it looks like the powers that be are still considering the position of post 2021 SPA'ers. Will just have to wait and see what happens.
    Yes indeed - see links.
    • greenglide
    • By greenglide 6th Aug 18, 10:36 PM
    • 3,179 Posts
    • 2,065 Thanks
    greenglide
    At the moment, only those public sector pensioners who reach SPA before April 2021 get full protections. Mr S is ok, but I don't reach SPA until April 2022. I think the theory behind this decision is that 'us youngsters' have the benefit of being able to increase our pensions from the old basic State pension to the full single tier pension by working/paying NI from 2016 onwards.
    The original reasoning was supposed to be tied in with equalisation and extension and was up to 2019, wasnt it?


    I have never understood why this should be the case despite having a fair bit around it.
    • hyubh
    • By hyubh 7th Aug 18, 12:32 AM
    • 2,271 Posts
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    hyubh
    The original reasoning was supposed to be tied in with equalisation and extension and was up to 2019, wasnt it?

    I have never understood why this should be the case despite having a fair bit around it.
    Originally posted by greenglide
    The initial equalisation issue is straightforward: if there is no longer the mechanism for the balance of full PI to be paid through the state pension, then given GMP ages are different between men and women (and the scheme will pay - and always has paid - full PI for pensioners under GMP age), women reaching GMP age under nSP would lose out if the scheme didn't now pay full PI on GMPs in payment.

    However, you can't then simply say, well pay full PI on GMP up to age 65 for both men and women, due to the two sexes having different GMP accrual rates. It's a complete mess...
    • brewerdave
    • By brewerdave 7th Aug 18, 8:54 AM
    • 5,134 Posts
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    brewerdave
    I was just reading this thread and thinking that there should be a book written about State Pension and its interaction with contracted out DB pensions .......how about " GMP for Dummies" -I would certainly buy it ,having recently battled with the concepts of pre 88 GMP,post 88 GMP, ASP,COD, indexation pre SPA etc etc
    • Silvertabby
    • By Silvertabby 7th Aug 18, 11:11 AM
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    Silvertabby
    I was just reading this thread and thinking that there should be a book written about State Pension and its interaction with contracted out DB pensions .......how about " GMP for Dummies" -I would certainly buy it ,having recently battled with the concepts of pre 88 GMP,post 88 GMP, ASP,COD, indexation pre SPA etc etc
    Originally posted by brewerdave

    It would still be the size of War & Peace !
    • Silvertabby
    • By Silvertabby 7th Aug 18, 11:14 AM
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    Silvertabby
    The initial equalisation issue is straightforward: if there is no longer the mechanism for the balance of full PI to be paid through the state pension, then given GMP ages are different between men and women (and the scheme will pay - and always has paid - full PI for pensioners under GMP age), women reaching GMP age under nSP would lose out if the scheme didn't now pay full PI on GMPs in payment.

    However, you can't then simply say, well pay full PI on GMP up to age 65 for both men and women, due to the two sexes having different GMP accrual rates. It's a complete mess...
    Originally posted by hyubh

    There must a good (or bad?) reason why GMP age didn't increase with SPA age - but I've never been able to fathom it.
    • woolly_wombat
    • By woolly_wombat 7th Aug 18, 11:59 AM
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    woolly_wombat
    There must a good (or bad?) reason why GMP age didn't increase with SPA age - but I've never been able to fathom it.
    Originally posted by Silvertabby
    Lobbying from employers who didn't want to fund fixed rate GMP revaluation for wimmin up to SPA perhaps?

    Some of us can still remember the bitter opposition to part-timers' membership of employer pension schemes in the 1990s.
    • hyubh
    • By hyubh 7th Aug 18, 11:30 PM
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    hyubh
    Lobbying from employers who didn't want to fund fixed rate GMP revaluation for wimmin up to SPA perhaps?
    Originally posted by woolly_wombat
    Not really - GMP age not matching SPA isn't an issue in itself, since the old statutory late retirement factor for GMP still applies, regardless of SPA going up. This is different from the state pension itself, where 'normal pension age' rising hasn't involved any 'late retirement factor' to offset it.

    The cause of problems around GMP equalisation is squarely the government, whose preferred posture over the past 20-25 years has been to ignore the issue.
    • hyubh
    • By hyubh 7th Aug 18, 11:36 PM
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    hyubh
    There must a good (or bad?) reason why GMP age didn't increase with SPA age - but I've never been able to fathom it.
    Originally posted by Silvertabby
    What would be the good reason be for it to have changed...? GMP accrual ceased long ago - saying GMP ages ('NPAs') should be retrospectively altered is like saying LGPS membership from the 1970s and 1980s should retrospectively earn 2014 scheme benefits instead of the pension applicable to the scheme rules of the time...
    • woolly_wombat
    • By woolly_wombat 8th Aug 18, 11:45 AM
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    woolly_wombat
    Not really - GMP age not matching SPA isn't an issue in itself, since the old statutory late retirement factor for GMP still applies, regardless of SPA going up
    Originally posted by hyubh
    Do you have a link please hyubh?

    Can I defer my pension from a company that I left in 1985 until I am 65, and if so would the GMP continue to revalue by 8.5% pa, the same as it would if I were male?

    The scheme is underfunded so how would I be affected if it ended up in the PPF?
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