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Pension reduction !

Community Veteran
Posts: 7,906
Thanks: 588
Fixes: 8
Registered: 02-08-2007

Pension reduction !

I Know pensions have either not gone up much in the past or not gone up at all but I have now got a letter to inform me my pension is being REDUCED next year due to GMP  (guaranteed minimum pension)
Trying to get additional information about this is next to impossible.
I am referring to a works pension not my basic state pension.
Great start to the new year !!
10 REPLIES
Community Veteran
Posts: 18,542
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Registered: 12-08-2007

Re: Pension reduction !

It sounds like you are using a drawdown scheme.  The rules were changed to reflect the lower returns on investment but in the last budget they were revised upwards again.
Community Veteran
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Registered: 12-08-2007

Re: Pension reduction !

Community Veteran
Posts: 7,906
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Registered: 02-08-2007

Re: Pension reduction !

Thanks but it's not that.
I Worked for the NHS so it's a pension that has increased each year linked to the inflation rate.
My Tax code has not changed either.
Phoned the National Insurance contributions department this morning and they have had a number of calls but had no information about the change.
Some stuff on the internet but it might as well be written in a foreign language as it's meaningless to me.
Community Veteran
Posts: 18,542
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Registered: 12-08-2007

Re: Pension reduction !

I'd be interested to know what it is when you find out.
Community Veteran
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Registered: 02-02-2008

Re: Pension reduction !

IIRC GMP will kick in at State Pension age. If you took a works pension before that age then it may well be adjusted accordingly when you reach SPA.
e.g. may works pensions start at 60 for both men and women not 65 - though I know these ages are changing.
Have a read here: http://en.wikipedia.org/wiki/Guaranteed_Minimum_Pension
And obviously ask your pension provider to explain.  Wink
Community Veteran
Posts: 7,906
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Registered: 02-08-2007

Re: Pension reduction !

Thanks for the link which probably explains it but to be honest I am no wiser. Even they say,' The system therefore became increasingly complex' which is an understatement.
Current situation is that the people who are responsible for paying the pension are sending me a booklet about  GMP  but " it will take up to 2 weeks to reach you sir" so whether of not I am any wiser after getting the booklet remains to be seen.
Community Veteran
Posts: 18,542
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Registered: 12-08-2007

Re: Pension reduction !

I think the advice from HPsauce is right - ask your pension provider, which you appear to have done. Pensions are undergoing a lot of changes at present and it seems to be a minefield.
Community Veteran
Posts: 7,906
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Registered: 02-08-2007

Re: Pension reduction !

Lucky I have been retired for a few years now, at least I am not in the position of those who will retire a few months or even days before this new rate of pension starts in April 2017 and miss out on the new rate.
Community Veteran
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Registered: 02-08-2007

Re: Pension reduction !

Have been given the following explanation by the pensions department regarding the reduction in my pension which makes the position more clear, no one tells you about these things until they effect you !
I thank you for your recent enquiry.
The Pensions Advisory Service is an organisation that helps members of the public who have a valid complaint or dispute with their company pension scheme and/or pension provider. We also provide general pensions information.
The way being contracted-out of a final salary type pension scheme works as follows:
    Both you and the employer pay reduced rate national insurance contributions. For this, pension scheme has to provide you with a minimum pension at age 65, known as the GMP. The GMP is calculated differently to SERPS.
    At age 65, the DWP calculate your SERPS as though you was never contracted-out. From this figure, they then deduct the GMP (known as a ‘Contracted-Out Deduction (COD)’. If the GMP is more than SERPS, no SERPS will be paid until such time as SERPS is greater than the GMP and the excess of SERPS over and above the GMP will be paid to you by the DWP.
    In the meantime you will be receiving the GMP from the pension scheme, which can be part (or all) of your overall benefits and if your GP is more than SERPS, you are receiving an amount which exceeds the amount the State would have paid you.
    If there is an increase in SERPS, the state calculate your increased SERPS as though you never had a GMP and then deduct the GMP from this figure, taking into account  the statutory increase to post 5th April 1988 GMP the pension scheme has to pay you of the lesser of 3% or inflation (the pension scheme does not have to statutory increase your pre-6th April 1988 GMP). They do this same calculation every year.
The State increases SERPS/S2P in line with CPI. You will need to contact your scheme to find out the increase to your post 5th April 88 GMP (i.e. is it 3% or RPI if less or, 3% or CPI if less)
I trust the above has been of some help but please do not hesitate to contact me if any part of the above is unclear.
Yours sincerely
VileReynard
Seasoned Pro
Posts: 10,578
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Registered: 01-09-2007

Re: Pension reduction !

eh?  Cry