GMP EQUALISATION AND THE PIE OPTION
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The Group Trustee recently wrote to members about some changes they are proposing to make. The changes are linked to the Guaranteed Minimum Pension (GMP) part of your pension and a project called ‘GMP equalisation’, which all pension schemes like the Group have to carry out.
The Group Trustee is required to run a consultation with members about the planned changes, which will run from 15 June 2023 to 15 July 2023, and you can find out more in the GMP equalisation section below. In addition to addressing the changes required to GMPs, the Group Trustee would like to offer eligible members a choice to exchange some, or all, of your future pension increases for an immediate increase to your pension. You can read more about this option (called pension increase exchange or PIE) here.
First, the Group Trustee needs to address an historic inequality relating to Guaranteed Minimum Pension (GMP) benefits in the Group.
What are we proposing?
As part of addressing the inequality, the Group Trustee is proposing to convert all GMPs in the Group into another form of pension.
This process is known as ‘GMP conversion’ and would enable the Trustee to simplify the Group’s benefit structure.
As part of the GMP conversion process, the Group Trustee is required to consult with members on how they propose to do this.
- The changes and the proposal may result in an uplift to some Group members’ pensions and/or a back-payment to correct any past inequalities.
- Any increase to pensions or back-payments will likely be modest.
- In all cases, addressing the historical inequality will not reduce anyone’s pension.
If the proposal to convert GMPs goes ahead, your pension would change to a simplified Group pension (Pension A) that addresses the GMP inequality and will still increase in future, broadly in the same way that it does today.
At the same time as the Group Trustee carries out the GMP conversion part of this exercise (subject to consultation), eligible members will be given a choice for their pension, known as PIE.
The option is to exchange some, or all, of their future pension increases for an immediate increase to their pension.
This is known as a Pension Increase Exchange (PIE) option. For simplicity, we are calling this Pension B.
Eligible members will be able to get impartial financial advice – at no cost – to help them decide whether or not to accept the PIE option.
The PIE option will be available to certain members only and eligibility will only be determined once we have addressed GMPs. We will let you know later this year if you are eligible.
Do you need to opt in to the PIE option?
If you received a letter from us in June 2023 and are age 80 or over and DO want to receive more information about Pension B, please fill in your Opting in form and send it back to us before 15 July 2023.
If you are under age 80 and DO NOT want to receive more information about Pension B, please fill in your Opting out form and send it back to us before 15 July 2023.
KEY DATES
Please refer to the printed materials we send you for the key dates to be aware of. This is the current timeline and may be subject to change.
Mid-June 2023: letters issued to pensioner and dependant Group members explaining the proposal
15 June 2023: consultation on GMP proposal opens
15 July 2023: consultation closes
Autumn 2023: confirmation of eligibility letters issued; PIE option packs issued to eligible members
OVERVIEW
This section provides more information about the GMP equalisation/conversion and the PIE option.
The two elements at the heart of these pension changes are:
-
Addressing the inequality
Following the outcome of a High Court legal case, UK pension schemes such as the Group need to address an inequality relating to some historic GMP benefits. (See the ‘What is GMP?’ below.) This may affect your Group pension. See the GMP Q&A for more detail.
- Simplifying pensions
We are also proposing to convert all GMPs in the Group into a different form of pension, which will enable us to simplify the Group’s benefit structure. See the GMP Q&A for more detail.
What is GMP?
Part of your Group pension is GMP, which is a substitute for part of the old State Pension arrangement. You would have received this part of your pension from the Government had you not been a member of the Group.
See the GMP Q&A for more detail.
Consulting with you
As part of the GMP conversion process, the Group Trustee is required to consult with members.
This is your opportunity to ask questions and provide feedback any feedback.
The consultation period will end on 15 July.
See ‘Contacts’ for how to provide feedback during consultation.
After consultation
The Group Trustee will decide whether to move forward with GMP conversion and this will be confirmed at the end of July with a news update on the Group website – so please remember to revisit then.
A one-off choice for your pension
In addition to addressing the historic GMP inequality, the Group Trustee would like to offer eligible members a choice.
The option is to exchange some, or all, of your future pension increases for an immediate increase to your pension.
This is known as a pension increase exchange (PIE) option. For simplicity, we are calling this Pension B.
Eligibility
This option will be available to eligible members only and eligibility will only be determined once we have addressed the historical inequality. We will confirm whether you’re eligible later this year.
Financial advice at no cost to you
The Group Trustee has appointed Chase de Vere, a regulated financial adviser, to help eligible members decide whether or not to take up the Pension B (PIE) option.
The Group Trustee will meet the cost of Chase de Vere’s advice – there will be no cost to you, regardless of your decision.
If you choose to receive an option pack, you will receive full details in late summer. Your option pack will include confirmation of how your pension has changed as a result of addressing the historical GMP inequality (including GMP conversion if we proceed with our proposal).
Option pack
If you choose to receive information about PIE, the Group Trustee will send you an option pack at the end of the summer.
Your option pack will include confirmation of how your pension has changed as a result of addressing the historical GMP inequality (including GMP conversion if we proceed with our proposal).
See the PIE Q&A for more detail.
WHAT YOU NEED TO DO
Please make sure you understand the proposal and what this might mean for your Group pension:
- The letter, which was sent to eligible members, explains the proposal, the key dates in the process you need to be aware of and the arrangements we have put in place to consult with you.
- The letter also included a ‘Questions and Answers’ document that contains more information about GMPs and our proposal. In particular, we would like to draw your attention to Section 2, questions 6 and 7. These explain how your pension may change if the proposal goes ahead.
- If you received a letter in June and are age 80 or over and DO want to receive more information about Pension B, please fill in your Opting in form and send it back to us before 15 July 2023.
- If you are under age 80 and DO NOT want to receive more information about Pension B, please fill in your Opting out form and send it back to us before 15 July 2023.
There are Q&A available covering GMP and PIE which will be updated during the consultation period should any additional information be helpful.
Remember
Your pension may increase as a result of addressing the historical GMP inequality, though any increase will likely be modest.
Where next?
Check for key messages and reminders as news updates.
CONTACTS
Please view the respective Q&As on GMP and on PIE if you have any questions. If you wish to provide feedback on this exercise, please use the contact details provided below.
Consultation feedback
Before a decision is made on how to proceed, the Group Trustee is consulting with you about the proposed method for addressing the historical GMP inequality. This is your opportunity to ask questions and provide any feedback.
The consultation period will last for 30 days and it ends on Saturday, 15 July 2023.
The Group Trustee will consider carefully all relevant comments we receive about the changes proposed during the consultation period.
If you wish to provide feedback, please get in touch using the dedicated contact details set up for this consultation:
Email: ngridpiegmp@railpen.com
Phone: 0808 196 3694
Post: National Grid Electricity Group of the Electricity Supply Pension Scheme, Railpen, Stooperdale Offices, Brinkburn Road, Darlington DL3 6EH
General queries
If you have a general query about the Group or your benefits, please get in touch with Railpen using the usual contact details: https://ngeg.nationalgridpensions.com/contact-us/