Guaranteed Minimum Pension
The Guaranteed Minimum Pension (GMP) is the minimum pension that defined benefit (DB) schemes, like the Scheme, have to pay members that were contracted out of the State Earnings Related Pension Scheme (SERPS) and the State Second Pension (S2P) between 6 April 1978 and 5 April 1997.
In October 2018, the High Court found that, in some cases, this left both men and women worse off. It ruled that DB schemes must equalise the GMP for anyone affected. If you think this impacts you, please contact Mercer.
The Trustee has undertaken a reconciliation exercise to ensure that the GMP information it holds on members' records is in line with that held by HMRC. Once this exercise is complete, the Trustee will consider rectifying any differences between the GMPs held by the Scheme and those held on HMRC's records.
A GMP is a minimum level of pension that some schemes had to provide for members who had contracted out of SERPS.
If you are receiving your Scheme pension and are over age 65 (male) or age 60 (female), part of your pension entitlement includes an element of pension known as GMP.
From 6 April 1978 to 5 April 1997, you could accrue an entitlement to an earnings-related pension in addition to your basic State Pension. This was known as SERPS. Schemes could contract out of SERPS (with both the employee and employer paying lower National Insurance (NI) contributions) if the pension the Company provided was as least equal to a statutory minimum known as GMP.
The Scheme, like many other company-sponsored schemes, contracted out of SERPS and members' pension entitlements include a GMP element as a result. The method for calculating GMPs is set out in legislation and can result in inequality between men and women, predominantly because GMPs are payable from different ages for men (65) and women (60) – and they accrue at different rates.
In 2016, the Government introduced the flat rate State Pension, and contracting out ceased.
In October 2018, the High Court handed down its judgement in the Lloyds Bank case ruling that schemes are required to equalise GMPs between men and women earned for service between 17 May 1990 and 5 April 1997. This is a complex area and it is likely to be some time before the Trustee reaches any decisions as to how it will comply with this ruling.
The Trustee has undertaken a reconciliation exercise to ensure that the GMP information it holds on members' records is in line with that held by HMRC. This project is in its final stages. The next step is for the Trustee to consider rectification of any differences between the GMPs held by the Scheme and those held on HMRC's records. More information on how the Trustee will address both these requirements will be provided as it becomes available.