BullDog wrote:Take a close look at the deferred pension terms. If part of the deferred pension is called GMP pension, once you reach state retirement age the terms might change. I took benefits from a deferred pension at 60 which was the normal age for that scheme. Once reaching state pension age the GMP part of the pension no longer gets an annual increase. Unfortunately, the pension I'm talking about which was deferred since 1992, most of it is classed as GMP. The annual increase on the pension in payment was <1% this year despite CPI being in double figures. I was quite surprised at the terms it's a deferred DB pension from a (deep) blue chip company. I hope your scheme is better than mine, it's worth a check. HTH.
On the face of it this does rather sound to me as if it could possibly be a basic misunderstanding of how the system works, wrt a Contracted Out DB pension and (I assume) an old style State Pension. This is what I have.
I retired, before SP retirement age, on a (public service, contributory and fully funded!) Contracted Out DB pension. I got a sum of £X per year. Every year X was quoted as a single figure and the new single figure uprated by inflation (originally by RPI, now CPI). Simple. Then I reached SP retirement age, it all changed.
Now £X is shown as composed of several separate bands, of unequal amounts. These bands have different indexation rules that apply to them. In my case, using last year's statement of new pension amount, the bands are:
Pre 88 GMP - Zero indexed
Post 88 GMP - Indexed by CPI up a max of 3%
Pre97 Excess - Indexed by CPI
Post 97 Excess - Indexed by CPI
Post 05 Excess - No idea, presumably CPI, doesn't apply to me so figure shown is zero
Now then! (Pre 88 GMP + Post 88 GMP) values taken together comprise my COD - Contracted Out Deduction.
Now refer to this year's statement of my upcoming, old style SP from the DWP. This has four components:
Basic state pension
Pre 97 additional State Pension
Less Contracted-Out Deduction
Graduated Retirement Benefit
Ignoring the last one (GRB) focus on
Pre 97 additional State Pension, Less Contracted-Out Deduction that is: Pre97 additional SP (i.e. SERPS)
minus COD (Remember that from my DB pension?). This is the simple mechanism.
In other words, my DB contracted out pension IS fully indexed. But, when I said the Pre 88 GMP component is zero indexed that means it is not indexed inside the DB contracted out pension, it is fully indexed via my SP. When I said the Post 88 GMP component is only indexed up to 3%, it is, inside the DB contracted out pension, indexing above that 3% is indexed via my SP. The simple mechanism to effect this is that subtraction shown above:
Pre97 additional SP minus COD That is how, this year my SP, as I posted above, managed - in total - to increase after CPI indexation by over 15%.
It all makes sense in the end.
