There used to be two state pensions: the main one, and an extra one called the State Earnings Related Pension Scheme (SERPS). If an employer agreed to provide a minimum amount of pension that was at least as good as SERPS, it could opt out of SERPS. This meant that both employers and members paid lower National Insurance Contributions. This pension was known as the Guaranteed Minimum Pension (GMP). If members worked between 1978 and 1997, part of their pension could be GMP.
There are two key requirements under pensions law relating to GMP:
1. Pension increases on GMP
The GMP forms part of the overall MPS Guaranteed Pension but has different pension increase arrangements to the rest of the Guaranteed Pension once a member reaches age 65 (or 60 if you are female).
The GMP is split into two amounts, one earned before 6 April 1988 (Pre 88) and one earned after 6 April 1988 (Post 88). Pre 88 and Post 88 GMPs increase differently.
- Pre 88 GMP does not increase
- Post 88 GMP increases in line with the Consumer Price Index (CPI) measure of inflation or 3% - whatever is less. The increase is applied in April each year
2. Minimum amount of pension
There is a requirement placed on MPS to pay members a pension at least equal to the GMP at GMP age (65 for men, 60 for women). For most members, the Scheme pension is more than the GMP, but in the very few cases where it is lower than the GMP, the Scheme would increase the MPS pension so that it covers the GMP. If this applies to you, the Scheme Administrators will let you know.
You find more details about GMP in the GMP factsheet.