How GMP equalisation could affect your pension
Some members of company pension schemes have a Guaranteed Minimum Pension (GMP) as part of their pension, which is calculated differently for men and women. This can cause men and women to receive different pension amounts. However, as a result of a court ruling, benefits now have to be adjusted to take account of unequal GMPs.
Many pension schemes have started work to check if and how members’ pensions are affected – this process is ongoing.
Men and women could both be affected by GMP equalisation, but it’s likely that any change will make only a small difference to your total pension.
If you transferred your pension and your transfer included a GMP from service on or after 17 May 1990, the calculation of your transfer may need to be reviewed. You may be entitled to a top-up payment to the scheme you transferred your benefits to.
You might have a Guaranteed Minimum Pension (GMP) if you were a member of a defined benefit (final salary) pension scheme between 1978 and 1997. Your GMP is the minimum amount of income that the pension scheme must provide you with in retirement.
Members between those dates were often automatically removed from part of the state pension, known as the State Earnings Related Pension Scheme (SERPS). This was called being ‘contracted out of SERPS’. To ensure that these members did not lose out as a result, they were guaranteed a minimum pension from the pension scheme broadly equivalent to the amount they would have received if still in SERPS.
(Note that if you contracted out of SERPS via a defined contribution workplace or personal pension, you are unlikely to be entitled to GMP).
GMPs are payable from age 60 for women and 65 for men.
After many years of uncertainty, the High Court ruled in October 2018 that benefits should be equalised for the effect of unequal GMPs, but this is complicated and there are still some unresolved issues.
A further ruling, in 2020, considered issues around correcting past transfers out, and requires company pension schemes to work out whether a further transfer payment is needed.
The High Court didn't set a date for schemes to complete this work.
No. You are only affected if you have a GMP built up between 17 May 1990 and 5 April 1997. This means you would have been employed and a member of the pension scheme during any part of that period. It may affect men or women, or their dependants, who are still members of the scheme, or who’ve started to receive their pension, or who have died or transferred to another pension scheme or to a personal pension.
The calculations are complex and depend on the pension scheme rules and a range of data including your period of employment and earnings. It could take a long time to complete this. You can ask the trustees of the pension scheme for an update about their plans for GMP equalisation work.
We can’t tell you because we don’t hold the details of how your original pension and any GMP was calculated. You’ll need to ask the trustees of the pension scheme.
Some people won’t get any extra money because they’re getting the same or more than someone of the opposite sex. The amount people could get will also vary depending on a number of factors linked to the time they were a member of the pension scheme, the pension scheme rules and the pension they built up. However most people won’t see a large increase – if any - to their pension as a result of GMP Equalisation. No-one’s pension should go down in value.
- You might be entitled to an immediate top up to your pension if you’re already receiving it.
- Alternatively you might be told you’ll get an increase to your pension payments in the future.
- If the pension scheme decides that you’ve already been paid less pension than a person of the opposite sex you might get a cash payment to make up for this.
- The pension scheme may decide to use GMP conversion to achieve GMP equalisation for members, This could change the amount of pension you’ll receive in future.
- If you’ve transferred your pension you may be offered a top up payment to your new pension scheme or private plan.
- The pension scheme may decide that the pension doesn’t need to be changed because you’re getting more than a comparable person of the opposite sex.
- Your pension should not be reduced as a result of GMP Equalisation.
- The scheme trustees will provide more information once the calculations are complete.
Some company pension schemes may choose to convert all the GMP for some or all scheme members into a non-GMP pension benefit of equivalent value. Equalising the part of the GMP built up between 17 May 1990 and 5 April 1997 can be done as part of the conversion process.
The scheme trustees will be able to tell you if they are taking or considering this approach and provide more information on what it means for you and your pension.
If you’ve transferred your pension to a personal pension or buyout plan, you can’t be included in any conversion process.
- If you transferred to a buyout plan (‘Section 32’ plan) or deferred annuity you may still have a GMP. For other transfers you’ll have given up any GMP and it will have been converted into a cash transfer payment and invested along with your other pension money.
- You may be entitled to an extra payment regardless of which type of pension you have with us. But we can’t tell from our records if this will apply to you.
- Your original company pension scheme is responsible for deciding this and calculating any additional payment.
- You can ask the scheme trustees for an update on their plans to equalise GMP and make payments to those affected.
We can’t tell whether you’re due a top-up from our records. The trustees of your original company pension scheme are responsible for this and should contact you. The amount of your GMP won’t change as a result of GMP equalisation but you might be entitled to an extra payment into your pension.
We’ll accept the extra payment provided your plan still takes top-ups and that it meets our current minimum amounts for your plan. We can’t accept any further amounts on annuities – you’ll need to advise the trustees that you need a different solution.
As you no longer have a plan with us, you’ll need to ask the trustees of your original company pension scheme to find out what your options are.
We’ll accept the extra payment provided your plan still takes top-ups and that it meets our current minimum amounts for your plan. If not you’ll need to ask the trustees of your original company pension scheme to find out what your options are.
As you no longer have a plan with us, you’ll need to explain this to the trustees of your original company pension scheme. You might need to agree with them that they can contact your new pension provider.
This may be possible in some circumstances. For example, if the top up is a small amount or it can’t be paid into your current pension. If this applies to you, you could contact the trustees of the pension scheme about this.
You can get help on this from the government’s MoneyHelper service.
You shouldn’t need to make a claim. The trustees of your original company pension scheme should contact you – we’d suggest getting in touch with them if you want to know more.
You shouldn’t need to ask a third party or another firm to help you. You could contact the trustees of your original company pension scheme and ask them about their plans for equalising GMP.
Yes, it may do. The trustees of the pension scheme should contact you if they still have your address and contact details.
No, you shouldn’t delay your plans. GMP Equalisation may not affect you, and if it does, the trustees of the pension scheme will contact you to put things right – get in touch with them if you want to know more.
We’d always recommend that you take independent financial advice and for transfers that include a GMP and are more than £30,000, it’s a legal requirement. Your adviser should check to see whether the transferring scheme has taken appropriate action to address GMP Equalisation and if the transfer payment has correctly allowed for this.