What is the Pensions Increase?
Every April, your pension is increased in line with the Retail Price Index (RPI) announced in the previous September. As your Occupational Pension was earned through employment in the public services, your pension is increased in exactly the same way as a Civil Service Pensioner and Retired Teacher or N.H.S employee.
Who qualifies for an increase?
All pensioners who are over the age of 55 and, those under 55 who retired on ill-health or injury grounds. Widow’s, Widower’s, Civil Partners, Nominated Cohabiting Partners and Children’s and Dependant’s Pensions are increased automatically regardless of age.
Does the increase apply to the entire pension?
Yes, for all Pensioners under State Pension Age the whole increase will be paid with your Occupational Pension. Once you reach State Pension Age, if your pension includes a Guaranteed Minimum Pension (GMP), part of the increase will be paid by HM Revenue & Customs (HMRC) together with your State Pension.
Which Pensioners will have a GMP?
All of those who were contracted-out of the State Earnings Related Pension Scheme (SERPS, now known as State Second Pension S2P) and have their pension based wholly or in part on service after 5 April 1978 and before 6 April 1997. This will apply in most cases since most public service pensioners between these dates will have been contracted-out.
How is the increase paid when I have a GMP?
This is normally calculated and paid in two parts from two sources. HMRC will pay any increase related to your GMP earned before 6 April 1988 and any increase above 3% a year on any GMP earned from 6 April 1988 to 5 April 1997. Cheshire Pension Fund will pay the increase on the rest of your pension together with any increase up to 3% a year due on your GMP, earned from 6 April 1988 to 5 April 1997. Calculating the increase in this way should not affect the total amount of pensions increase that you receive.
Simplified Illustration
Assuming an Occupational Pension of £10,000 a year, a GMP of £2,000 of which £1,000 was earned after 6 April 1988 and an increase of 4% (for ease of illustration only). The example shows that the total pensions increase of £400 a year equals 4% increase on the Occupational Pension.
|
Amount |
£ |
Comments |
| Total Pension |
10,000.00 |
|
| Less GMP |
2,000.00 |
|
|
8,000.00 |
4% increase |
| P.I. paid on excess over total GMP |
320.00 |
|
| P.I. paid on post '88 GMP |
30.00 |
3% increase |
| Add back GMP |
2,000.00 |
|
| New total |
10,350.00 |
|
|
Amount Paid by HMRC |
£ |
Comments |
| Total GMP |
2,000 |
|
| Less Post '88 GMP |
1,000.00 |
|
|
|
1,000.00 |
4% increase |
| P.I. Paid on pre '88 GMP |
40.00 |
|
| P.I Paid on post '88 GMP |
10.00 |
1% increase |
| Total Increase on state pension |
50.000 |
|
|
|