A Guaranteed Minimum Pension (GMP) is the minimum level of pension that our Scheme has to provide for members who were contracted-out of the State Earnings-Related Pension Scheme (or the State Second Pension) on a salary-related basis, between 6 April 1978 and 5 April 1997.
In the past, GMPs have been calculated differently and paid from different ages for men and women, as they reflected the different state pension ages for men and women at that time.
The High Court has ruled that defined benefit pension schemes like ours must ‘equalise’ pensions if men and woman have been treated differently.
We have started a project to do this. The process of working out which members might be due a top-up to their pension is very complicated, and some issues may take time to resolve. Some members will get a small top-up to their Scheme pension but others won’t. Importantly, no members will see the value of their pension go down as aresult of this project.
Any members who are due a top-up will be given more information once the project is further advanced. We will write to you, and you don’t need to do anything. If you don’t receive information from us it means that GMP equalisation doesn’t apply to you.
In the meantime, the Scheme Administrator will continue to pay benefits, and provide quotations as usual, in line with the existing Scheme rules.
Some FAQs and answers are available on this page in case you want to know more about GMP equalisation.
A Guaranteed Minimum Pension is the minimum level of pension that our Scheme has to provide for employees who were contracted out of the State Earnings-Related Pension Scheme (or the State Second Pension) on a salary related basis, between 6 April 1978 and 5 April 1997.
There used to be two state pensions – a flat rate Basic State Pension and the Additional State Pension, known as the State Earnings Related Pension Scheme (SERPS), or State Second Pension (S2P). Since 6 April 2016, these State Pensions have been replaced by a new single tier State pension.
Members of an occupational pension scheme could be contracted out of SERPS/S2P, which meant that the Company and members paid lower National Insurance contributions. These members built up a lower State Pension, but in return the Scheme had to guarantee a minimum level of pension. This minimum pension was intended to be broadly equivalent to the SERPS pension members would otherwise have received from the State and was called a Guaranteed Minimum Pension. We refer to this as a GMP for simplicity.
In the past, GMPs have been calculated differently and paid from different ages for men and women, as they reflected the different state pension ages for men and women at that time. The Government has indicated that it believes members’ pensions should be equalised for the effects of GMPs. For many years, the Government and the pensions industry have been trying to agree what, if anything, to do about GMP equalisation and how equalisation might be achieved.
Not in our Scheme. The decision to contract out of SERPS/S2P was made by the Company. This decision automatically applied to all members who were building up benefits in the Scheme.
Our Scheme has to pay you a pension income that is at least as much as the GMP amount. If you haven’t built up enough benefits in the Scheme to give you your GMP amount, the Scheme has to make up the difference. Also, any GMP built up between 6 April 1988 and 6 April 1997 must be protected against rising prices once it starts to be paid.
Historically, State Pensions were paid to men and women at different ages (65 for men and 60 for women), but state pension ages have been gradually equalised at age 65. However, GMPs are still payable from age 65 for men and age 60 for women. As a result, men and women could build up GMPs at different rates and their GMPs would be payable at different dates.
The law changed following a court case in 1990 and occupational pension schemes had to have equal pension treatment for men and women for any benefits built up after 17 May 1990, including the same pension age. However, this ruling did not apply to GMPs. This means that GMPs were still unequal because they were based on the old State Pension system.
We are working with external advisers to equalise GMP benefits that members built up between 17 May 1990 and 5 April 1997. This will be a complicated and lengthy project and it may be late 2021 or 2022 before it is completed.
Some members will receive a small top-up to their pension benefits, but we do not expect amounts to be significant. Our best guess at the moment is that top-ups could perhaps be around £60 per year on average.
For members who are already receiving a pension which includes a GMP, the GMP is likely to be a small part of the overall pension, so an adjustment to the GMP will make little difference to the overall pension.
No, the value of your pension won’t go down as a result of doing this project.
Yes. We’re making an allowance for having to pay slightly higher benefits overall. Ultimately this adds to the Scheme deficit.
No. You don’t need to do anything. We’ll notify you if your benefits are going to be topped-up.
It may be 2021 or 2022 before pension top-up calculations can be determined. We’ll notify you if your benefits are going to be topped-up.
We will continue to calculate pension benefits on an unadjusted basis, until we are in a position to calculate any GMP top-up benefits. You will then be notified at a later stage if any additional payments become due.
We have adjusted transfer values to allow for equalisation of GMPs, so that these may continue to be paid out.
