Author Topic: Ceasing of increases on Guaranteed Minimum Pension (GMP) paid by DWP  (Read 12813 times)

Billopp

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I would like to bring to every ones attention that when the new single-tier pension starts on 6 April 2016 for people reaching state pension age on and after 6 April 2016 will no longer receive cost of living increases on that part of their occupational pension scheme known as GMP where it is the responsibility of the DWP to pay it. This has been confirmed to me by Steve Webb the pensions minister and the DWP. They deny that the DWP have ever paid the increases or are responsible for paying them even though their booklet "A Guide to State Pensions" NP 46 dated April 2004 explains it very well on pages 51/2 that they do. They now claim their booklet NP46 was wrong.  The potential loss for a woman can be up to £23,000 and man £17,000.
There is a very good article in the Independent Newspaper 10 January 2014 that explains the problem very well  "Losers who never knew in the switch to single-tier pension" by Neasa Macerlean. If you also enter into Google They Work for You Teresa Pearce, Steve Webb and Guaranteed Minimum Pension it should bring up a statement from Steve Webb The Minister of state ,DWP where he says "The Department of Work and Pensions does not pay increases on guaranteed minimum pensions (GMPs)" etc.


This subject was not covered in Green or White papers or in any risk assessment issued by the Government, I have also had a look at the Work and Pension Committee meetings where they received oral and written evidence and could not find any mention of the subject of GMP increases no longer being paid by DWP with state additional pension.


I just can't understand why this subject has not been picked up by any of the people and organisations who gave evidence to the committee who were all professionals. It is mainly going to effect people who have pre 1988 GMPs.


I would be interested to know if anyone else realizes that GMP increases will no longer be paid when single-tier pension starts on 6 April 2016.

Granny49

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Thank you for the information Billopp and welcome to the forum.  I don't think this applies to me as I did not opt out.


It seems that the best way to make these things known is to tweet about them and encourage retweets.  Companies and government departments seem to worry about these things being known to many people (going viral) and find it easier to ignore when few people know.
Don't get my personality and my attitude confused.  My personality is me, my attitude depends on you.

Billopp

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Hi Granny49 ,


Thanks for your reply. You state that you did not opt out, was this because you were not in a final salary scheme? If you were in a final salary ie DB contracted out scheme you did have the option to opt out, but if you did, then in most schemes you were not allowed to join the pension scheme if you did not agree to contract out,I think the only exception was if you had elected to pay the reduced NI ie married woman's NI rate.  I would be interested to know what kind of scheme you were in and when you joined it as you may have been contracted out without realizing it.


The strange thing about this lack of GMP increases is that if you look at any other Government Dept that mention GMP increases, ie Hansard,Cabinet,Treasury Inland Revenue, House of Commons Library and National Audit Office you will see that they all state  that the DWP/State pay all or part of GMP increases as do every single public service pension scheme booklet. Most of them can be seen on Google. The Government are trying to put forward this change by stealth and as I said before I just can't understand why the Pensions Industry have not picked up on this subject.




Granny49

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I am trying to sort out my confusion Billopp.  No, I was not in a final salary scheme.  I was advised not to opt out (I think ::)) because of the age I was at the time.  Perhaps there was an earlier opt out that I am not aware of.
Don't get my personality and my attitude confused.  My personality is me, my attitude depends on you.

Citizen68

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Billopp, welcome, and thank you for putting this on the forum.


This sounds like a good question to ask anyone who comes around electioneering, either this year or next: personally, I think I'd like to find a way of asking it loudly and very publicly at the polling station!

Phil

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Pension citeria's always changing & there have always been winners & losers.

Those of us who paid into a private pension scheme, on the the basis that we'd be better off, were conned when Pension Credits were introduced, which meant that we no better off for paying into a private pension.

Those of us currently in receipt of a basic State pension will always get less  than those who get their State Pension after April 2016.

We've just had to learn to 'suck it up' & live with it,  just as the pension losers on this occasion will have to do.
"I've stopped arguing with idiots. They will only bring me down to their level and beat me with experience.”

Paraphrased from George Carlin

Billopp

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Hi Phil,


Not always true that you will receive less. Anyone retiring in the first year under single -tier pension will only receive their basic state pension if they have been contracted out of state second pension pension and possibly a very small state second pension. They will be worse off as they will not receive any increases on their GMP normally paid by the DWPas mentioned in my firs posting.


According to the Institute of Fiscal Studies only about 40% of people retiring in the first year under single tier will receive the full single tier pension the reason being either they have not paid 35 years NI or they have the full single tier reduced by their contracted out pension.

Phil

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Hi Phil,

Not always true that you will receive less. Anyone retiring in the first year under single -tier pension will only receive their basic state pension if they have been contracted out of state second pension pension and possibly a very small state second pension. They will be worse off as they will not receive any increases on their GMP normally paid by the DWPas mentioned in my firs posting.

According to the Institute of Fiscal Studies only about 40% of people retiring in the first year under single tier will receive the full single tier pension the reason being either they have not paid 35 years NI or they have the full single tier reduced by their contracted out pension.

I probably didn't make myself clear.

I wasn't commenting on the fiscal structure of this specific regulation.

I was saying that with all pension changes there have been winners & losers & that will always be the case & the losers have to learn to accept it.

E.g. most of us on this forum had to pay for 40 years to get a full pension whilst the newbie pensioners only had to pay for 30 years.
"I've stopped arguing with idiots. They will only bring me down to their level and beat me with experience.”

Paraphrased from George Carlin

stellamaris

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Billop I have been looking up some of the  stuff you mentioned and other things - and not managed to get much clarity.


I was contracted out for 30 plus years but had about 9 years contracted in, so I do get a small amount extra on my state pension.  There was some kerfuffle over this about 4 years ago when they were writing to people saying they had been paid twice on this amount and that it would be reduced but they wouldn't notice it too much because the tax free allowance had gone up!!   


As far as I can make out this new rule will apply to those due to retire on the new pension but who also had years of contracting out.  As the new pension is more than the previous full pension the GMP will allegedly be covered by that. So those retiring in 2016 will get more or less the same as they would have under the old system.


I must admit I was more interested in whether current retirees like me who had contracted out would still be getting their contributions increased.  Even with this I am still a couple of pounds  per week under the new pension amount.  Haven't quite found out yet, but am living in hope that they can't take even more from us.
Keep on chooglin' - John Fogerty
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Billopp

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Hi Stellamaris,


From your remarks I assume that you worked for the public sector for part of your working life. I do remember reading that some people in the public sector were receiving increases on their GMPs twice and that they would not collect any over payments but would in future only pay the increase on GMP  with the state additional pension.


You are correct that what I am writing about will only apply to people reaching state pension age on and after 6 April 2016 and that people will receive more or less the same pension in total. Anyone reaching state pension age in first year of single-tier pension who has been contracted out all their working life will only receive roughly what the basic state pension would have been at the time.


The main gainers will be people who have been self employed most of their life or people who have taken time off to bring up children or have been carers and don't have enough NI or credits.
 
One thing I would mention is that people retiring  under single-tier pension will be allowed to receive triple lock increases on the single tier pension say about £154 when it starts which has a minimum increase of 2.5% and inflation rate or average salary if higher. Anything above £154 will only get CPI inflation rate.


People who are on state pension prior to 6 April 2016 like you and myself will continue to receive triple lock on our basic state pension of say £113 and CPI on state additional pension and GMPs.  

 

 
For someone reaching state pension age say 4 April 2016 who has never been contracted out and has say a basic state pension of £115 and state second pension of £50 they will only get triple lock on £115 and CPI on state second pension.  

 
A person with identical benefits who has never been contracted out reaching state pension age on 6 April 2016 will receive triple lock on say £154 if that is the single tier when it starts and CPI on £9. As Triple lock is likely to pay much higher cost of living increases over the years the person reaching state pension age will be much better off over time than the person reaching state pension age under the current system even though they started of with identical pensions.  

 
You also state that you are a couple of pounds under the new pension amount. If you had children and took time off work to bring them up do you know if you received HRP ie credits towards NI. The reason I ask is that when I was looking at my wife's pension foercast I noticed they had missed her HRP protection. When she contacted them they said they had missed 9 years NI credit.  

Granny49

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Re: Ceasing of increases on Guaranteed Minimum Pension (GMP) paid by DWP
« Reply #10 on: May 14, 2014, 01:00:05 PM »
Do you actually think the new system will be simpler, Billopp?
Don't get my personality and my attitude confused.  My personality is me, my attitude depends on you.

stellamaris

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Re: Ceasing of increases on Guaranteed Minimum Pension (GMP) paid by DWP
« Reply #11 on: May 14, 2014, 02:27:07 PM »
Thanks for all that Billopp - I think I am even more depressed!!  Does that mean that the small amount of GMP I get now won't be subject to the triple lock in the future.  Another bit of chipping away at the standard of living, like stopping the extra bit of tax relief.  At least future pensioners with a bit of cash won't have the Pension Credit marker hanging over their heads - they should all be entitled to the same as each other.


I meant that my current state pension is at the moment just a few pounds behind what the proposed new pension will be so I had a short-lived fantasy that it might catch up by the time it came about.  Very short-lived unfortunately. And I will not be owed any credits because I had minimum time off for child-care so that was covered, and I always paid the full NI Stamp.  I seem to remember there was child tax allowance in the far distant days.  Oh well, hope my other pension picks up the slack but it's hardly gold-plated these days.


Anyway thanks again for the info, found it very interesting.









Keep on chooglin' - John Fogerty
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firenze

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Re: Ceasing of increases on Guaranteed Minimum Pension (GMP) paid by DWP
« Reply #12 on: May 14, 2014, 05:03:25 PM »
Not a chance of Mrs average understanding all that Billop thank goodness there are in existence bodies to advise and help many who need pension help.
Age is a question of mind over matter. If you don't mind, it doesn't matter.

Mark Twain.

Billopp

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Re: Ceasing of increases on Guaranteed Minimum Pension (GMP) paid by DWP
« Reply #13 on: May 14, 2014, 07:39:10 PM »
Hi Granny49,


It may be slightly simpler but they will have trouble with transitional arrangements and inheritance and also having also having to run the current system so I think they will have problems because they will have to work with different rules depending on if a person reaches state pension age before 6 April 2016 or after 5 April 2016. Plenty of scope for errors.


According to a report done by the Institute of Fiscal studies last year nearly everyone will receive less pension under single-tier than they do under the existing system  other than self employed and people who have been carers without sufficient contributions.

Billopp

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Re: Ceasing of increases on Guaranteed Minimum Pension (GMP) paid by DWP
« Reply #14 on: May 14, 2014, 07:45:30 PM »
Hi tellamaris,


GMPs have never been subject triple lock, it is only the basic state pension that receives triple lock increases under the current system.