Pension Question for an IFA
Discussion
ok, I have a pension with a major pharmaceutical company that I worked for from the years 1987 to 1993.
I've recently asked them for a status of the pension in order to consider transfering it to my new pension fund.
They have provided this information but I'm a little lost on the terminology they are using.
Under the section Entitlement they are showing
Guaranteed Cash Equivalent:
GMP element £ xxxx.xx
Pre 06/04/1997 element £ xxxxx.xx (yes there is intentionally an extra 'x' there
Post 05/04/1997 element £ 0.00
Total Guaranteed Cash Equivalent £xxxxx,xx
Guarantee date 16/10/2007
Later they go on to specify Estimated Transfer Values - these are all £0.00
Then there is a section on Deferred Pension with Total Pension showing as £xxxx.xx
Lots of EPB, Pre and Post GMP, balance of pre 06/04/79. temporary pension and total pension, these are all insignificant numbers.
Please would someone explain to me in simple terms what it means.
What is GMP, what is Guaranteed Cash Equivalent, what is Deffered Pension.
Am I better to leave this alone, move it, cash it, or start contributing back into it?
Many thanks.
I've recently asked them for a status of the pension in order to consider transfering it to my new pension fund.
They have provided this information but I'm a little lost on the terminology they are using.
Under the section Entitlement they are showing
Guaranteed Cash Equivalent:
GMP element £ xxxx.xx
Pre 06/04/1997 element £ xxxxx.xx (yes there is intentionally an extra 'x' there
Post 05/04/1997 element £ 0.00
Total Guaranteed Cash Equivalent £xxxxx,xx
Guarantee date 16/10/2007
Later they go on to specify Estimated Transfer Values - these are all £0.00
Then there is a section on Deferred Pension with Total Pension showing as £xxxx.xx
Lots of EPB, Pre and Post GMP, balance of pre 06/04/79. temporary pension and total pension, these are all insignificant numbers.
Please would someone explain to me in simple terms what it means.
What is GMP, what is Guaranteed Cash Equivalent, what is Deffered Pension.
Am I better to leave this alone, move it, cash it, or start contributing back into it?
Many thanks.
It is more a question for an IFA, than a legal type person.
Im not an expert, but GMP means Guaranteed Minimum Pension, and Deffered Pension relates to an increase you will get if retire after the normal retirement age.
All these indicate that it is an Occupational scheme that may have slightly different scheme rules to normal.
The most important figure you need to look at is estimated transfer value, which as it sounds is the figure a new scheme would receive if it was transferred. I have no idea why this would be zero.
I will stand corrected on any of the above though.
Im not an expert, but GMP means Guaranteed Minimum Pension, and Deffered Pension relates to an increase you will get if retire after the normal retirement age.
All these indicate that it is an Occupational scheme that may have slightly different scheme rules to normal.
The most important figure you need to look at is estimated transfer value, which as it sounds is the figure a new scheme would receive if it was transferred. I have no idea why this would be zero.
I will stand corrected on any of the above though.
Edited by sato on Wednesday 17th October 15:26
Broadly:
GMP is Guaranteed Minimum Pension, which is the part of your pension which effectively replaces the SERPS pension that you have given up by being contracted out of this part of the State pension scheme. This part of you pension probably increases at a different rate to the rest of your pension, both before and after retirement, but depends on your own scheme's rules.
A Deferred Pension is just a pension which is due to start some time in the future (rather than one which starts now - an immediate pension). So if you leave an employer at age 35 and your normal retirement age is 65 then you have to wait another 30 years for your pension. The amount of this Deferred Pension will be increased to allow partly for inflation during the period between leaving and age 65.
The Cash Equivalent is the current value, on certain assumptions, of the Deferred Pension. In other words, if you transfer the Cash Equivalent amount to your own personal pension and all these assumptions, including investment returns, turn out to have been correct, then you will have exactly the amount of money that you will need at age 65 in order to buy a pension from an insurance company of the same amount as the Deferred Pension given up. If your Company Scheme is underfunded then your Cash Equivalent might be reduced below the full value.
A Guaranteed Cash Equivalent is simply a Cash Equivalent that is guaranteed not to change in amount, provided that you choose to transfer within a certain period of the Guarantee Date. I suspect that your scheme follows the statutory requirement - which is to allow a three month period for the guarantee. Purpose is to allow you to take advice etc and make your choice based on a known amount of transfer value, rather than it being recalculated to reflect investment markets etc at the time when you choose to actually go ahead and transfer.
You can blame the Government for most of the jargon, and your scheme Trustees for not requiring their administrators to communicate using plain english!
Hope this of some help.
GMP is Guaranteed Minimum Pension, which is the part of your pension which effectively replaces the SERPS pension that you have given up by being contracted out of this part of the State pension scheme. This part of you pension probably increases at a different rate to the rest of your pension, both before and after retirement, but depends on your own scheme's rules.
A Deferred Pension is just a pension which is due to start some time in the future (rather than one which starts now - an immediate pension). So if you leave an employer at age 35 and your normal retirement age is 65 then you have to wait another 30 years for your pension. The amount of this Deferred Pension will be increased to allow partly for inflation during the period between leaving and age 65.
The Cash Equivalent is the current value, on certain assumptions, of the Deferred Pension. In other words, if you transfer the Cash Equivalent amount to your own personal pension and all these assumptions, including investment returns, turn out to have been correct, then you will have exactly the amount of money that you will need at age 65 in order to buy a pension from an insurance company of the same amount as the Deferred Pension given up. If your Company Scheme is underfunded then your Cash Equivalent might be reduced below the full value.
A Guaranteed Cash Equivalent is simply a Cash Equivalent that is guaranteed not to change in amount, provided that you choose to transfer within a certain period of the Guarantee Date. I suspect that your scheme follows the statutory requirement - which is to allow a three month period for the guarantee. Purpose is to allow you to take advice etc and make your choice based on a known amount of transfer value, rather than it being recalculated to reflect investment markets etc at the time when you choose to actually go ahead and transfer.
You can blame the Government for most of the jargon, and your scheme Trustees for not requiring their administrators to communicate using plain english!
Hope this of some help.
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