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This thread: Meaning of GMP (Guaranteed Minimum Pension) Post No.
     
05/07/2009 08:20
Gerch


Post Count: 6
Join Date: 05/07/2009

When I left my first employer in 1986 after approx. 10 years service, I received a letter from the company pension manager stating that they had retained £xxxxx as required by law to preserve a GMP of £7800 at age 65.

The scheme was contracted out of SERPS and was a final salary scheme.

The company was later taken over, then sold but my pension stayed with the company that took them over.

My question is, Am I legally gaurenteed a minimum pension of £7800 at age 65 from the pension provider?

I ask because a few years back, I wrote to the pension company and asked for clarification on this issue. The answer was non comittal and only highlighted the likely value at that time. If it continued to grow at the rate it had been, then it may reach £7800. However there appeared to be no gaurentee and was well before the current stock market problems.

Advice greatfully received.

 

 
06/07/2009 14:46
Mike Jones


Post Count: 116
Join Date: 08/06/2006

Hi Gerch,

Why do you have a Guaranteed Minimum Pension?
From 6th April 1978, the State Earnings Related Pension Scheme (SERPS) was introduced which provided a benefit in addition to the Basic State Pension for employed persons who make contributions between an upper and lower earnings limit, determined by the Government.

When an occupational pension scheme decided not to participate in SERPS, the scheme was said to be 'Contracted-out'.

The DSS maintain a record of the minimum SERPS pension at State Retirement Age that a member would have received from the State had the member not been Contracted-out. This is called ‘Notional GMP’.

From 6th April 1997 onwards, the future accumulation of GMP’s ended. Any GMP earned before 6th April 1997 has to be maintained, safeguarded, effectively ‘ringfenced’ and clearly identified. Schemes may continue to contract-out after 5th April 1997 either on a money-purchase basis or under the Reference Scheme Test.

During the time YOU were a member of your company pension scheme it appears that you were Contracted-out of SERPS. Therefore, you accumulated a Guaranteed Minimum Pension (GMP) which is the pension that is provided as the SERPS replacement. And this MUST be paid to you as an absolute minimum from State Pension Age.

Increases to your Guaranteed Minimum Pension (GMP)
When you ceased to be an active member of your pension will have included a ‘Guaranteed Minimum Pension as Date of Leaving Service’.

Your pension scheme must increase the GMP you accumulated as at your Date of Leaving Service up to State Pension Age by a specific amount if it used 'fixed rate revaluation' – and this interest rate will depend upon the date you left service. This is worked out by compound interest for each complete tax year between the date you left and your State Pension Age. The ‘revaluation’ rate (this is the term given to increases before retirement) could be:

- 8.50% if you left before 6th April 1988
- 7.25% if you left after 5th April 1988 and before 6th April 1993
- 7.00% if you left after 5th April 1993 and before 6th April 1997
- 6.25% if you left after 5th April 1997 and before 6th April 2002
- 4.50% if you left after 5th April 2002 and before 6th April 2007
- 4.00% if you left after 5th April 2007

From the figure you have given, I suspect that your GMP of £7,800 p.a. includes the guaranteed revaluation and therefore that is what you can expect to get as a minimum from your pension scheme at age 65.

Hope that helps. If not please post more.


Mike Jones
MyCompanyPension.co.uk

 
06/07/2009 15:23
Gerch


Post Count: 6
Join Date: 05/07/2009

Hello Mike,

Many thanks for the prompt and concise response. Sounds like I need to take good care of the letter I received in 1986. I remember at the time they gave me a small refund of contributions which I think related to some recent requirements on inflationary increases that they were probably trying to avoid by refunding the contributions made from that date to the leaving date.

My only worry now is that the pension fund I was transfered to is not in the best of health according to reports I read. If the pension fund folded is my GMP at risk like the other fund members or as a defered pensioner do I have any additional protection.

 

 
06/07/2009 15:57
Mike Jones


Post Count: 116
Join Date: 08/06/2006

Hi again Gerch,

Quote: Sounds like I need to take good care of the letter I received in 1986.

Absolutely. Any correspondence relating to any of your pension provision should be retained safely. And if your move address, don’t forget to tell the scheme/pension administrator or provider.

Quote: I remember at the time they gave me a small refund of contributions which I think related to some recent requirements on inflationary increases that they were probably trying to avoid by refunding the contributions made from that date to the leaving date.

I haven’t heard of that happening before: i.e. having a deferred pension AND receiving a refund – particularly given that you say your left in 1986. It is conceivable under the circumstances that you describe – it’s just a new to me.

Quote: My only worry now is that the pension fund I was transfered to is not in the best of health according to reports I read. If the pension fund folded is my GMP at risk like the other fund members or as a defered pensioner do I have any additional protection.

You’re very wise to keep abreast of how your pension benefits are fairing. Have you read our Factsheets – How secure is my Pension?

You should also pay a visit to the Pension Protection Fund’s website where it describes the various events and situations that it may be able to assist scheme members where the sponsoring employer has become insolvent.

Any more questions, please don’t hesitate to ask and if you liked this website then spread the word!

Kind regards,

Mike Jones
MyCompanyPension.co.uk
 

 
06/07/2009 15:59
Mike Jones


Post Count: 116
Join Date: 08/06/2006

Hi again Gerch,

Quote: Sounds like I need to take good care of the letter I received in 1986.

Absolutely. Any correspondence relating to any of your pension provision should be retained safely. And if you move address, don’t forget to tell the scheme/pension administrator or provider.

Quote: I remember at the time they gave me a small refund of contributions which I think related to some recent requirements on inflationary increases that they were probably trying to avoid by refunding the contributions made from that date to the leaving date.

I haven’t heard of that happening before: i.e. having a deferred pension AND receiving a refund – particularly given that you say you left in 1986. It is conceivable under the circumstances that you describe – it’s just new to me.

Quote: My only worry now is that the pension fund I was transfered to is not in the best of health according to reports I read. If the pension fund folded is my GMP at risk like the other fund members or as a defered pensioner do I have any additional protection.

You’re very wise to keep abreast of how your pension benefits are fairing. Have you read our Factsheets – How secure is my Pension?

You should also pay a visit to the Pension Protection Fund’s website where it describes the various events and situations that it may be able to assist scheme members where the sponsoring employer has become insolvent.

Any more questions, please don’t hesitate to ask and if you liked this website then spread the word!

Kind regards,

Mike Jones
MyCompanyPension.co.uk

 
03/02/2017 12:58
Linda


Post Count: 1
Join Date: 03/02/2017

Hi, guys! Thank you so much for the Guaranteed Minimum Pension information you provided us with! I'll spread the word! Should you need any wriitng assistance, you are welcome to use our educational blog - here is one of my favorite articles recently published: http://edit-it.org/blog/past-si... and-exceptions

 

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