Checking your GMP amount is correct

We have recently gone through an exercise to compare the Plan’s records against those held by HM Revenue and Customs (“HMRC”). This exercise has been necessary due to the Government’s decision to cease “contracting-out” for all defined benefit pension arrangements with effect from 6 April 2016. The majority of defined benefit pension schemes in the UK have been through, or are currently going through, a similar process.

“Contracting-out” was an option available to all UK occupational defined benefit pension schemes between 6 April 1978 and 6 April 2016, whereby employees and employers could pay a reduced rate of National Insurance Contributions and opt out of the additional earnings-related element of the State Pension (previously known as SERPS or subsequently the State Second Pension or “S2P”). Those pension schemes who opted to be “contracted-out” in the period to 5 April 1997 had to ensure that a minimum level of pension was provided through the pension scheme, broadly equivalent to the amount of State Pension given up. This element of pension is called the Guaranteed Minimum Pension (GMP).

The main purpose of the exercise undertaken by the Trustees has been to ensure that the GMP element of the pension agrees with the records held by HMRC. In some cases, the result of the exercise has revealed a discrepancy between the GMP held on members’ records when compared with the records held by HMRC. If you have been affected by this, you will have received a letter from the Trustee to explain how this impacts your pension and what action will be taken to correct this.

Reviewing your pension for the impact of GMP equalisation

We are currently going through an exercise to equalise benefits where a member has an element of GMP. A court judgement on 17 May 1990 required schemes to equalise retirement ages for men and women and, following a further court judgement in 2018, trustees are also required to equalise GMPs built up between 1990 and 1997 to remove any inequality. 

If you are affected by GMP equalisation, the Plan administrator will be in contact in the next couple of years.