Guaranteed Minimum Pension (GMP).

A Guaranteed Minimum Pension (GMP) is the minimum amount of pension the Trustee must provide for a member who had built up pension before April 1997.

This was one of the conditions of all Scheme members being contracted-out of the Additional State Pension. Your GMP makes up part of your total annual pension amount, with the amount that’s left (in excess of your GMP) representing your Scheme Pension.

The State Pension used to be made up of two parts – the Basic State Pension and the Additional State Pension. From April 1978, some workplace pension schemes chose to ‘contract out’ of the Additional State Pension. The rules for contracting-out were very complex, but the general idea was that both employees and employers would pay a lower rate of National Insurance contributions. In exchange, employees would not build up an Additional State Pension and they would earn a minimum amount of pension in their workplace pension scheme instead. This was called the Guaranteed Minimum Pension (GMP).

The amount of GMP is broadly the same as the Additional State Pension that you would have received if you had not been contracted-out and had paid a higher rate of National Insurance contributions.

What does it mean if I have a GMP?

Firstly, the Trustee must always make sure that the total annual pension you receive when it is in payment is more than the amount of GMP you have earned.

Secondly, because the rules for GMPs are set by the Government, the Trustee must apply increases to the GMP part of your pension in line with legislation. Whereas your Scheme pension increases in line with the Scheme Rules.

This means that the increases applied to your pension, whether it is in payment or not yet in payment, will be affected by how much of your total annual pension is taken up by your GMP.

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