Guaranteed Minimum Pension (GMP)
Guaranteed Minimum Pension (GMP) is a type of additional protection that you may have included in your LGPS pension.
You will have a GMP if you paid into the LGPS between 6 April 1978 and 6 April 1997 and may have it if you transferred in service from another scheme where you were contracted out during this period.
Contracting out
Before 1 April 2016, the State Pension had two tiers:
- Basic State Pension
- State Earnings Related Pension (SERPS), later renamed State Second Pension (S2P)
Defined benefit public sector pension schemes, such as the LGPS, could choose to ‘contract out' of SERPS. This meant that anyone contributing towards the LGPS did not contribute towards SERPS and consequently paid a lower rate of National Insurance than someone who was not a member of a contracted out scheme.
Why GMP was introduced
To ensure that by paying into an LGPS pension an employee was not worse off than someone who contributed towards SERPs, the government introduced a GMP.
The GMP ensures that what you receive in your LGPS pension is broadly equivalent to what you would have received had you paid into SERPS. Essentially, the GMP is the minimum amount you must be paid in retirement for pension built up between 6 April 1978 and 5 April 1997.
The LGPS was contracted out of SERPS, and later S2P, until 5 April 2016 when a single tier State Pension was introduced.
However, in 1997, the Reference Scheme Test was introduced as a protection to replace GMP. This meant that pension schemes could only contract out of SERPS if they offered a certain level of pension benefits. The LGPS met the criteria and was therefore able to continue to contract out of SERPS, but GMPs no longer applied. This is why you won’t have a GMP on any pension built up after 5 April 1997.
GMP Age
If you have a GMP as part of your pension benefits, this will be paid to you as part of your pension when you reach GMP age which is currently 60 for a woman and 65 for a man.
GMP only pensions
If your main LGPS pension is not yet in payment, and you have a GMP as part of your pension benefits, you won’t be able to defer payment of the GMP when you reach GMP age. Not unless you are still working in an employment where you are eligible to join the LGPS.
We will write to you to obtain your bank details in order to begin paying you this amount.
Having the GMP only paid to you will not impact on your main scheme LGPS pension benefits. However, a GMP only pension is subject to Income Tax.
Value of the GMP
The value of your GMP will not appear as a separate amount on any statement, it forms part of the pension you will receive from GMP payable age. The method of calculating a GMP is complicated. Essentially, it is worked out based on the level of National Insurance contributions paid while you were working, how many years you worked while contracted out, the amount of pension contributions paid, and how much of this was paid before and after 5 April 1988.
You can find more information about how GMPs are calculated on the government’s website.
Increases on GMP
Each April, a Pensions Increase is applied to your pension according to the Consumer Price Index (CPI). If you started receiving your pension after GMP payable age, but before you reached State Pension age, all of the increases will be included in your LGPS pension payments.
Once you reach State Pension age, the responsibility for paying increases on the GMP elements of your pension may be shared between the LGPS and the government depending on your dates of service and when you reached State Pension age. If the responsibility falls to the government, increases on GMPs are paid as part of your State Pension.
| Date you reach State Pension age | GMP earned between 6 April 1978 and 5 April 1988 (Pre-1988 GMP) | GMP earned between 6 April 1988 and 5 April 1997 (Post-1988 GMP) | Excess pension* |
|---|---|---|---|
| Before 5 April 2016 | Increases on GMP included in State Pension | First 3% of increases on GMP included in LGPS pension. Any excess (if applicable) paid as part of your State Pension | Increase included in LGPS pension |
| After 5 April 2016 | Increases on GMP included in LGPS pension | Increases on GMP included in LGPS pension | Increase included in LGPS pension |
*Any amount of pension in excess of the GMP.
State Pension after 6 April 2016
On 6 April 2016 the government introduced a single tier State Pension termed ‘the new state pension’. This replaced the previous 2 tier system.
To receive a full State Pension, you would require 35 years’ worth of full rate national insurance contributions to qualify. If you were in the LGPS during the time it was contracted out, and you reached State Pension age after 6 April 2016, you may not qualify for the full State Pension. If you find that you are not entitled to the full State Pension, it is worth bearing in mind that under the pre 2016 State Pension rules, when the LGPS was contracted out, you would only have received the basic pension, not the S2P. The basic rate State Pension then was much less than the basic rate of State Pension today, therefore it is unlikely you would have been better off under the old rules.
If your State Pension is not yet in payment, you can obtain a forecast of how much you will receive, and you may also be able to top up your State Pension.
Contact us about your pension
Details of how to Contact us about your pension