Posted: April 23rd, 2012
MGN Old Scheme Annual Pension Increases
Last year’s AMP Autumn Newsletter referred to the “Vital 3%” query that followed on from our Spring 2011 newsletter that raised a query on the 5% annual pension increase formula for the Mirror Group Pension Scheme (Old Scheme).
The minimum 3% Guaranteed Minimum Pension (GMP) annual increase was a requirement for companies that opted out of the State Earnings Related Pension Scheme (SERPS) – as the Mirror Group Pension Scheme did until 1992.
Following the Spring 2011 newsletter, the subsequent letter from the Company and Trustee Board to all members in April 2011 further explained the situation when members reached the State Retirement Age. However, the letter did not include any explanation of the 5% increase option’s bracketed rider – 5% of the excess over GMP (plus 3% on GMP earned since 5 April 1988) – the basis of our original query.
Since then we have been assured that the GMP/SERPS query is being seriously and properly considered by the Trustees and their legal advisors.
Giles Orton, a senior partner at Eversheds LLP, (and our legal representative since 1991) has advised that “I have reviewed the matter for the Association of Mirror Pensioners. I am not satisfied that affected members are not worse off. Though nor am I satisfied that members are definitely worse off. The inter-relationship between the SERPS pension and the former GMP is far from straightforward. I have put some queries to the Trustees which they have not so far been able to answer”.
It was hoped that an answer would be given at the last AGM. However, we had been advised earlier this year that another more urgent and related issue had arisen that is presently being discussed by the Trustees with the Trustee lawyers and Leading Counsel. This other issue may have to go to Court for a direction. Consequently, an answer to our GMP/SERPS query has been delayed in the meantime.
However, we hope to hear further at a meeting with the Trustee Chairman and our respective legal advisors later this month.
Whilst SERPS increases have been around 3% for the last decade the move by the Government to the lower Consumer Price Index (CPI) as opposed to the present Retail Price Index (RPI) is likely to mean that SERPS increases could well be lower than 3% in the future (even 0% again). So far, the Government has not made a commitment to identical annual basic State pension percentage increases.
The Government’s proposed new single tier State pension of some £140 per week has also raised doubts on whether the SERPS or other State pension additions will be incorporated or annual increases frozen in the future.
That is why the Committee feels that it is important to clarify the pension increase rules as soon as possible.
If the State is wholly responsible for the annual Guaranteed Minimum Pension of 3% increase then all Old Scheme members may well lose out in the future!
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