What is a Guaranteed Minimum Pension (GMP)?
In 1978 the Government introduced a top-up to the basic State Pension called the State Earnings Related Pension Scheme, or 'SERPS' (later renamed as the State Second Pension, or 'S2P'). Under this arrangement, both employers and employees would pay higher National Insurance (NI) contributions towards SERPS. However, as many people were already members of company pension schemes, the Government allowed these schemes to contract out of SERPS — and most schemes chose to contract out – which meant that the NI contributions paid by both employers and employees were lower.
To make sure members of company pension schemes could not be worse off by being contracted out of SERPS, company schemes were required to provide a Guaranteed Minimum Pension (GMP) of at least the same amount that their members would have earned under SERPS.
So the GMP is the minimum amount of pension that APS must pay to members who built up pension between 6 April 1978 and 5 April 1997 as the Scheme was contracted out of SERPS. The GMP is included in the pension earned from APS and is not paid on top but, if you haven't built up enough benefits in the Scheme to provide your full GMP amount, the Scheme must make up the difference.
If you built up any pension in the Scheme between 6 April 1978 and 5 April 1997 then your pension probably includes a GMP.
CloseThe Scheme must make your GMP available from your GMP age. This is age 60 if you are a woman or age 65 if you are a man.
CloseMost pensions within APS increase in some way under the rules of your Scheme. Before you reach your GMP age, the Scheme is responsible for providing inflationary increases on your whole pension entitlement in line with the Scheme rules.
CloseIf you reached your State Pension age before 6 April 2016 you will have qualified for the 'old' State Pension. You will receive broadly the same increases that you receive on your APS pension but responsibility for paying these is shared between your Scheme and the Government. GMPs built up between 6 April 1978 and 5 April 1988 are protected from inflation by the Government. The Scheme is not required to pay increases on this part of your pension but increases are worked out by the Government and included with your State Pension.
GMPs built up between 6 April 1988 and 6 April 1997 are also protected from inflation. APS pays up to the first 3% in any year. Any increase due above 3% is worked out by the Government and included with your State Pension.
The State Pension also includes a 'triple lock' guarantee, which promises to pay the higher of the increase in average earnings, Consumer Prices Index (CPI) or 2.5%.
CloseWe stop paying any increases on any GMP earned before April 1988 when you reach your GMP age and the Government takes over responsibility for increases on this GMP.
We pay increases on any GMP earned after April 1988, up to the first 3%, and the Government pays any increases due above 3%.
CloseYes. The requirement for the Scheme to increase any Pre 1988 GMP amount ceases when you reach GMP age and the Scheme is only required to increase any Post 1988 GMP up to the first 3%. State Pension ages and GMP ages were originally identical for men and women (age 65 for men, age 60 for women), with the Government taking over responsibility for paying the remaining increases on any GMP amounts.
Although State Pension age has now been equalised at age 65 for men and women (and now rising to age 68 over a phased period), GMP ages for men and women have not changed and are still age 60 for women and age 65 for men.
As the Government does not provide increases on GMP amounts until you reach your State Pension age, there could be a period (between reaching GMP age and reaching State Pension age) during which you do not receive any increases on it.
CloseIf you have a GMP, there could be a time during which you do not receive any increases on it if your State Pension age is later than age 60 (if you are a woman) or age 65 (if you are a man).
The GMP is paid as part of your APS pension once you reach your GMP age.
The Scheme is responsible for paying any increases due on your GMP until you reach your GMP age. At that time the requirement for the Scheme to add increases stops for any GMP built up to 5 April 1988. The Scheme is still required to add inflationary increases - up to the first 3% a year - on any GMP built up since 5 April 1988. If you qualify for the State Pension after 6 April 2016 the Government no longer takes over responsibility for any increases due on your GMP.
If you reach State Pension Age on or after 6 April 2016 you will qualify for the 'new' State Pension. The date you’ll qualify for this could be later than age 60 (women) or age 65 (men) so there may be a period during which your GMP does not receive any increases from either the Scheme or the State.
The new State Pension from April 2016 also includes the ‘triple lock’ guarantee, which promises to pay the higher of the increase in average earnings, Consumer Prices Index (CPI) or 2.5%. The Government has said that the new State Pension will provide an improved overall benefit for most people, although most APS members qualifying for the New State Pension from 6 April 2016 onwards will find their State Pension will be the same amount as the Old State Pension, as the Scheme was contracted out of SERPS/S2P.
- You can visit our Videos page to watch Ian Heath, BA Pensioner and Trustee Director, explain how this change affects him.
- Our GMP case studies provide an individual guide to how the GMP may affect you. GMP case studies - Male GMP case studies - Female
- You can find out your State Pension age by visiting the Government's website