Preserved pension
If more than 2 years’ service the member is entitled to a preserved pension known as a short service benefit. The member is then known as a deferred member or a deferred pensioner.
The preserved pension re-valued annually so the benefits keep their value in line with inflation. The rates depend on if the scheme was contracted out or not.
Not contracted out prior to 6 April 2016:
The rate by which benefits are revalued in deferment depends upon the date the member left the scheme and the period of benefit accrual within the scheme:
The CPI figure used for one year is the CPI in the previous September. Ie 2018 CPI figure is from September 2017
F2B Contracted out prior to 6 April 2016
Part of the benefits accrued will be the guaranteed minimum pension which is revalued differently to the other benefits. Is can be revalued in 3 different ways
1. In line with national average earnings
2. At a fixed rate which is the most common method with the rate depending on when the member left the scheme:
- before 6 April 1988: 8.5%;
- 6 April 1988 – 5 April 1993: 5%;
- 6 April 1993 – 5 April 1997: 0%;
- 6 April 1997 – 5 April 2002: 25%;
- 6 April 2002 – 5 April 2007: 5%;
- 6 April 2007 – 5 April 2012: 4.0%; and
- 6 April 2012 – 5 April 2017: 4.75%.
- 6 April 2017 onwards: 3.5%
3. For leavers before 6 April 1997 it was possible to limit the revaluation to 5% pa with a return for paying the DWP a limited revaluation premium. This meant the DWP made up any different to the full rate in line with national average earnings.
Up until 6 April 1997, part of a member’s accrued pension under a contracted-out scheme was the guaranteed minimum pension (GMP). The underlying principle is that the GMP must hold its value against rising earnings rather than prices.
For benefits in excess of the GMP and benefits accrued after 5th April 1997:
