Guaranteed Minimum Pension (GMP)

Many defined benefit pension schemes were contracted out of the State Earnings-Related Pension Scheme (SERPS) between 6 April 1978 and 5 April 2002. SERPS provided a top-up to the Basic State Pension. As a result, both members and participating employers paid lower National Insurance contributions. In exchange, the schemes took on responsibility for paying the equivalent top-up pension their members would have earned through SERPS.

If you had contracted-out service between 6 April 1978 and 5 April 1997, when you were a member of the Scheme, this part of your pension is called GMP. GMP is the guaranteed minimum pension the Scheme had to provide to you if you had contracted-out membership during this period, once you reach GMP age. GMP age is 65 for men and 60 for women.

Under the Scheme Rules, you would receive 1/60 of your pensionable salary for every year you were a contributing member of the Scheme. Your pension is made up of three elements:

GMP built up between 6 April 1978 and 5 April 1988 (pre-88 GMP)
GMP built up between 6 April 1988 and 5 April 1997 (post 88 GMP)
the non-GMP excess, which is the amount of your Scheme pension above the GMP.

The GMP notionally increases in line with the Retail Prices Index (RPI) from the date you leave the Scheme until you reach GMP age. However, the Department for Work and Pensions (DWP) has agreed that pension schemes like ours can revalue your GMP at a fixed rate for each complete tax year between when you left the Scheme and your GMP age. The rate we apply as an increase to your GMP depends on when you left the Scheme, as shown in the following table:

Fixed-rate GMP revaluation

Date of leaving the Scheme	Fixed rate of revaluation
6 April 2022 – 5 April 2027	3.25%
6 April 2017 – 5 April 2022	3.5%
6 April 2012 – 5 April 2017	4.75%
6 April 2007 – 5 April 2012	4.0%
6 April 2002 – 5 April 2007	4.5%
6 April 1997 – 5 April 2002	6.25%
6 April 1993 – 5 April 1997	7.0%
6 April 1988 – 5 April 1993	7.5%
Before 6 April 1988	8.5%

When you reach GMP age, we do a test to give you the better of the notional RPI increase and the fixed-rate revaluation from the date you left the Scheme. If the fixed-rate increase on the GMP is higher than RPI, your pension will be increased. This is known as an uplift and will be equal to the difference between the RPI and fixed-rate increases.

Example

GMP at exit x RPI increases	£1,400.00 a year
GMP at exit x 7% increases	£2,000.00 a year
Uplift to pension at GMP age	£600.00 a year (£2,000.00 – £1,400.00)

Once you reach GMP age, the Scheme will apply the following annual increases to your pension:

Pre 88 GMP	0%
Post 88 GMP	Consumer Prices Index (CPI), up to a maximum of 3%
Pension (Not GMP)	Retail Prices Index (RPI) for September of the previous year

New rules require defined benefit pension schemes, like ours, to check members’ GMP and make adjustments to remove inequalities arising from the way GMPs were calculated for men and women. This is called GMP equalisation. This is a complex project, which will take some time to complete.

For many members, there will be little or no change to your current pension, and any top-up is expected to be relatively small. If this affects you, we’ll be in touch.