PensionsIncrease2009

PENSIONS INCREASE 2009

Each year we increase pensions in line with the Pensions Increase (Review) Order (Northern Ireland). The increase applies to whether you are a Scheme pensioner or a dependant in receipt of a pension. The only exception is if you are a pensioner under age 55 and you did not retire through ill-heath.

The rate of pensions increase from 6^th April 2009 is 5%.

If you have not been on pension for a full year, then you will not get a full year’s increase. For example, if you retired on 23 September 2008 you will get an increase of 2.5%. The table below lists the increases if you have been on retirement less than one year.

Date pension began	Percentage increase
7^th April 2008 – 21^st April 2008	5.00%
22^nd April 2008 – 21^st May 2008	4.58%
22^nd May 2008 – 21^st June 2008	4.17%
22^nd June 2008 – 21^st July 2008	3.75%
22^nd July 2008 – 21^st August 2008	3.33%
22^nd August 2008 – 21^st September 2008	2.92%
22^nd September 2008 – 21^st October 2008	2.50%
22^nd October 2008 – 21^st November 2008	2.08%
22^nd November 2008 – 21^st December 2008	1.67%
22^nd December 2008 – 21^st January 2009	1.25%
22^nd January 2009 – 21^st February 2009	0.83%
22^nd February 2009 – 21^st March 2009	0.42%
22^nd March 2009 onwards	Nil

If you have not reached State Pension Age the increase is paid by NILGOSC and will be included in your April payment.

If you have reached State Pension Age and have a Guaranteed Minimum Pension (GMP) in respect of membership between 6^th April 1978 and 5^th April 1997 you may find that the increase may not be the full 5%. This is because part of the increase due on the GMP portion is paid by the DSS along with your State Pension, the remainder is paid by NILGOSC. For a more detailed explanation of pensions increase please click here.

If you have reached State Pension Age and do not have membership between 6^th April 1978 and 5^th April 1997 you should receive the increase from NILGOSC.

What is pensions increase?

The Pensions (Increase) Act 1971 governs the cost of living increases which apply to public service pensions. Each year, in April, NILGOSC increases your pension to reflect rises in the cost of living. The annual increase in Scheme pension is the same increase as applies to the state retirement pension and other social security benefits.

What is a GMP?

The LGPS (NI) (the Scheme) is contracted out of the State Second Pension Scheme, previously known as the State Earnings Related Pension Scheme (SERPS). As a condition of contracting out for service before 1997, the Scheme had to guarantee that the pension benefits payable would be no less than a Guaranteed Minimum Pension (GMP). If you, or your deceased spouse, participated in the Scheme between 6 April 1978 and 5 April 1997 you will have earned a GMP.

This GMP is not a separate benefit paid in addition to your Scheme pension but the pension we pay you must equal or exceed your 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 Scheme pension is the same).

How is pensions increase applied to my GMP?

NILGOSC applies the pensions increase to the whole of your Scheme pension, including the GMP element up until your GMP comes into force. When your GMP element comes into force, the Government takes on responsibility for paying part of the increase. This is detailed below:

For service from 6 April 1978 to 5 April 1988 (pre-April 1988 GMP)

The Government will pay the pensions increase relating to the GMP you earned up to this date along with your State Pension.

For service between 6 April 1988 and 5 April 1997 (post-April 1988 GMP)

NILGOSC will pay increases on the GMP you earned in this period up to a maximum of 3%. In years when the increase is more than 3% the Government will pay the balance with your State Pension.

Example of Pensions Increase Calculation

Scheme Pension £5,000 per annum including

GMP pre-April 1988 of £1000 and

GMP post-April 1988 of £500

State Pension £4,700 per annum

Total Pension £9,700

Assume pensions increase of 5% is payable

Total increase you will receive is:

5% x £9,700 = £485

Total pension after 5% increase is applied is:

£9,700 + £485 = £10,185 per annum

The increase of £485 is paid as follows:

Paid by NILGOSC

Local Government Pension £5,000

Less GMP pre-April 88 £1,000

Less GMP post-April 88 £ 500 £1,500

£3,500

Increase 5% of £3,500 = £ 175

Add increase up to 3% on
Post-April 88 GMP

3% of £500 = £ 15

Total increase paid by NILGOSC £ 190

New Scheme Pension paid is £5,000 + £175 + £15 = £5,190

Paid by State

State Pension £4,700

Increase 5% of £4,700 = £235

Add increase on pre-April 88 GMP

5% of £1,000 £ 50

Add increase on post-April 88 GMP

(5% - 3%) = 2% of £500 £ 10

Total increase paid by State £295

New State Pension paid £4,700 + £295 = £4,995

Total increase paid

NILGOSC £190

State Pension £295

Total £485

What effect does the GMP have on the pension which NILGOSC pays me?

When your GMP comes into force, the National Insurance Contributions Office (NICO) tells NILGOSC the amount of your GMP. NILGOSC then adjusts its records to reflect the fact that the Government now pays some of the annual pensions increase on the GMP element of your Scheme pension along with your State Pension. As can be seen above, depending on whether you have pre-April 1998 GMP, post-April1988 GMP or a mixture of both types of GMPs, the increases must be paid by either NILGOSC or the Government or a split between both NILGOSC and the Government. However, the overall increase in your total pension i.e. Scheme pension plus State Pension should be the annual pensions increase amount.

Every year NILGOSC will calculate the increase relating to your pension, however we may have to do so before NICO has notified us of your GMP details. If this happens we may have to increase or reduce later pension payments to adjust for any overpayment or underpayment. We shall of course notify you in advance before doing so.