Andrew HoughtonParticipantJuly 9, 2019 at 10:45 amPost count: 766
The answer to your question is basically that what is in the table is the statutory minimum which the scheme is required to offer. However, individual scheme rules can be and sometimes were more generous (this is becoming increasingly rare these days). If the scheme rules at the time the client was a member allowed for more generous revaluation/ escalation then the employer is obliged to honour it and cannot amend them retrospectively.
If you look at the table, we can see:
1988 – 1997 (POST 88)
If SPA on/after 6/4/16 – escalation is full CPI up to max of 3% paid by Scheme. No increase in SP.
Service 6/4/97 – 5/4/05
5% or CPI, whichever is lower (LPI)
So the statutory requirement is for the scheme to escalate the pre-April 97 rights at CPI/3% and the post-April 97 rights at CPI/5%
However, if the scheme rules say that the whole thing is escalated in line with RPI at a minimum of 3% and a maximum of 5%, then the scheme is within its rights to do this as it is more generous than the statutory requirement (NOTE: RPI is more generous than CPI). And the scheme rules cannot be amended retrospectively, so the scheme would be obliged to honour this. By contrast, if the scheme rules had just said statutory then they would only have been obliged to escalate in payment as per the table. The statutory measure of inflation switched from RPI to CPI in 2011. So where the scheme rules said that the entitlement would be escalated in line with statutory requirements, the scheme can switch. If the rules specified RPI then it can’t. And if the rules specified a particular rate then the scheme is obliged to honour it, even if it is higher than the current statutory requirements.
As regards the second question, yes in theory the scheme CAN adopt different measures for pre and post-retirement indexation. In practice, it is probably never realistically going to happen. However, practice and exam world are two different kettles of fish and it may well happen in an exam case study.
Andrew Houghton, FPFS
Expert Pensionslesley rogersParticipantJuly 9, 2019 at 11:10 amPost count: 5
Phew …. thank you so much for your answer.
So just so I have it clear, my table gmp and non gmp, with revalulation based on CPI, but escalation in payment on RPI … and this is likely to make the case study table correct IF the scheme rules are written with RPI as default indexation for post retirement payments.
Ok, I had put down as an adviser error that as revaluation is on CPI, escalation should be based on CPI too – I’ll scrap that point and leave it as not an error.
Hope I’ve understood correctly and thank you xAndrew HoughtonParticipantJuly 9, 2019 at 11:26 amPost count: 766
Scheme rules basically override statutory (with the proviso that they can only be more generous, not less). But yes, you have understood correctly. There is nothing in theory to stop revaluation and escalation being linked to different inflation measures.
Andrew Houghton, FPFS
Expert Pensionslesley rogersParticipantJuly 9, 2019 at 11:32 amPost count: 5
Duly noted ….you are a lifesaver !
And thank you again for your fantastic guidance …
xlesley rogersParticipantDecember 18, 2019 at 4:52 pmPost count: 5
GMP is my nightmare.
I am trying to finally really my get head round GMP using John’s GMP table.
Looking at a case study (with no copy scheme docs) so I am working a bit blind, this is for a client with retirement post 2016, where there are post 97 S92B rights, for a person whom worked from 91 to 04, with revaluation of CPI at max 5% and escalation of RPI, 3% min, 5% max.
Should the escalation actually be split into 2 parts eg pre 97 service at CPI max 3%, and post 97 service CPI max 5%, or is the quote escalation ok to be across the board (eg scheme decision)
Also, can I assume that if is noted that the DB scheme is providing revaluation under CPI indexation eg CPI max 5%, that this would also apply to esalation, as under escalation, as they have stated RPI min 3% max 5% – I had it in my head that if the scheme chose to adopt CPI post April 2011 it would be across the board ….. or can they have different indexation measures to pre and post retirement ….. help feel like my head is going to fall off !!
Thanks guys for any help !
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