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MINIMUM PENSION (GMP) - ERROR IN CALCULATION
The
Service Personnel and Veterans Agency (SPVA) is sorry to have to
inform Veteran Customers that an error has been identified in respect
of a small proportion of Armed Forces Pension Scheme 75 (AFPS 75)
pension payments. This error is in respect of the application
of the Guaranteed Minimum Pension (GMP) element of the pensions of
some 6,000 members of AFPS 75.
The
error only affects 2% of the AFPS 75 pensioner community. Armed
Forces Compensation Scheme (AFCS), AFPS 05 and War Pensions
Scheme payments are not affected. SPVA
will have written to all those affected by 16 December (please allow
time for postal delivery). Anyone who has concerns can contact
the SPVA GMP helpline number on 0845 121 2514
Usually,
under Government Accounting rules, SPVA would seek repayment of any
amount overpaid in an occupational pension scheme such as AFPS. However,
in this case, SPVA are happy to inform you that GMP overpayments
relating to this issue will not be recovered.
This
error affects pensions administered by a number of government departments. The
vast bulk of AFPS monthly payments, some 360,000, are unaffected.
The
error came to light some months ago and a full audit has since been
undertaken to identify the scheme members involved along with the
cause and effect. The issue affects pensions paid by a number
of government departments including the Ministry of Defence. The
process for ensuring that pension records include the necessary National
Insurance contribution information has not worked effectively in
all cases.
Detailed
information for those affected
What
is a GMP?
A
GMP is the minimum pension which an occupational scheme such as the
Armed Forces Pension Scheme (AFPS) must provide as one of the conditions
of contracting out. The AFPS is contracted out of the Second
State pension, previously known as State Earnings Related Pension
Scheme (SERPS). If you or your deceased spouse were employed
in the Services and a member of AFPS 75 between 6 April 1978 and
5 April 1997 you will have earned a GMP.
GMP
is not a separate benefit paid in addition to your AFPS pension but
the pension we pay you must equal or exceed the GMP.
HM
Revenue and Customs work out the level of your GMP. Your GMP
comes into force normally when you ask for your State pension to
be paid to you. (There are circumstances when the GMP comes
into force at a later date but the effect on your AFPS pension is
the same).
What
is pensions increase?
The
Pensions (Increase) Act 1971 governs the cost of living increases
that apply to public service pensions. Xafinity Paymaster is
the organisation that pays your pension under contract to the SPVA,
who are the AFPS Administrators. Xafinity Paymaster increases
your pension each year to reflect rises in the cost of living as
centrally directed. The annual increase in public service pension
is the same percentage as that applied to additional State retirement
pensions and other Social Security benefits.
How
is the pensions increase applied to my GMP?
Xafinity
Paymaster applies the pension increase to the whole of your AFPS
pension, including the GMP element, until your GMP comes into force. At
this point your AFPS pension is paid as follows:
o for
service up to 5 April 1988
The
Government will pay the pensions increase relating to the GMP you
earned up to this date with your State pension.
o for
service between 6 April 1988 and 5 April 1997
Xafinity
Paymaster will pay increases on the GMP you earned in this period
up to 3%. In years when the increase is more than 3% the Government
will pay the balance with your State pension.
What
effect does this have on the pension you pay me?
When
your GMP comes into force the National Insurance Contribution Office
(NICO) tell Xafinity Paymaster the amount of your GMP. Paymaster
then adjust their records to reflect the fact that the Government
now pays some of the annual pensions increase on the GMP element
of your Armed Forces pension with your State pension. The overall
increase in your pension will however be the same.
So
why have I been overpaid?
Unfortunately
we learned that the transfer of data to Xafinity Paymaster was not
always successful. This meant that Xafinity Paymaster was not
able to take the necessary action to adjust the pension increase
they applied to your GMP to reflect that an element of the pensions
increase was now being paid with your State pension.
As
a result you have received increases twice; once from the AFPS scheme
and again with your State pension element of your pension. This
means that we may be paying you too much pension. Once we know
of an error in a person’s pension SPVA is obliged to adjust
the pension to reflect their true entitlement from the scheme.
Why
must you reduce my pension?
The
AFPS pension and GMP arrangements are statutory. We can only
pay you the amount of pension that you are entitled to under the
scheme rules, increased each year under the Pensions (Increase) Act
1971 and Social Security legislation.
Where
we find that we are paying someone more than they are entitled to,
we must put the correct level of pension into payment. You
were paid more than you were entitled to because Xafinity Paymaster
had not been instructed to adjust the pension increase applied to
your GMP, as explained earlier in this leaflet.
Next
Steps
Whilst
SPVA does not wish to cause unnecessary alarm, we are required to
inform you that we have identified this error and also wanted to
assure you that work remains ongoing to identify the exact extent
of the error relating to affected pensions. SPVA, as administrators
of the AFPS, is required under the relevant regulations, and as agreed
by the Government departments involved, to correct affected pensions
from April 09. However, work continues to calculate the exact
amount involved. It is likely that those identified will see
a small reduction in their pension, but at this stage SPVA cannot
tell affected individuals exactly how much that will be.
Usually,
under Government Accounting rules, SPVA would be required to seek
repayment of any amount overpaid in an occupational pension such
as AFPS. However, in this case, SPVA is happy to inform you
that GMP overpayments relating to this issue, will not be recovered.
Finally,
SPVA would like to apologise again for this error. We are doing
everything we can to correct this pension error, and provide you
with the actual figures involved as quickly as possible. There
is a helpline available and the
number is 0845 121 2514. Unfortunately
SPVA will be unable to supply you with any GMP figures at the moment
but will write to you in late March or April 2009 when we anticipate
being in a position to inform you of any change to your pension.
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