You may have read in the press about Guaranteed Minimum Pension equalisation, or GMP equalisation for short, and a recent court ruling.

We’ve put this page together to help explain what GMP is and the work the Scheme is currently undertaking in relation to it.

To get started you can watch our short video:

What is Guaranteed Minimum Pension (GMP)?

The State Pension used to be made up of two parts – the Basic State Pension and the Additional State Pension. From 6 April 1978 until 5 April 1997, some workplace pension schemes chose to ‘contract out’ of the Additional State Pension (ASP). 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 (NIC). In exchange, employees would not build up an ASP and they would earn a minimum amount of pension in their workplace pension scheme instead. This was called the Guaranteed Minimum Pension (GMP).

Your Scheme pension is made up of GMP and the excess over your GMP.

The amount of GMP is broadly the same as the ASP that you would have received from the State if you had not been contracted-out and had paid a higher rate of NIC.

If you were a member of a defined benefit (final salary) pension scheme between April 1978 and April 1997, you might have a GMP.

GMP Rectification (GMPr)

All pension schemes have been checking the GMP part of members’ records against those held by His Majesty’s Revenue & Customs (HMRC). In some cases, differences have been identified and correcting these differences is known as GMP rectification (GMPr).

This means that the Scheme will be looking to ensure that the records that we hold are correct. If they’re not, it may mean that there are changes to be made to some members’ benefits.

GMP Equalisation (GMPe)

Previously, state pensions were paid to men at age 65 and women at age 60. This meant that men and women built up GMP at different rates.

The High Court has ruled that this difference is incompatible with current legislation and that pension schemes must equalise benefits in respect of GMP between men and women earned from 17 May 1990 to 5 April 1997. This is a complex process, with a number of potential methods for equalisation. The Trustee is currently working out the best approach for equalising members’ benefits.

For further information on GMPe please read our questions and answers here.

What do I need to do?

You don’t need to do anything when it comes to GMP. The Scheme and its administrators are running all the necessary calculations and updates to work out any impact on your pension.

There is no date by which GMPe and GMPr need to be completed, so don’t worry if you haven’t heard anything, the Scheme will be in touch as soon as the information has been finalised. If you don’t hear from the Scheme in relation to GMP at any point, your pension is unaffected.