Guaranteed Minimum Pension (GMP)

Understanding the basics

What is a GMP?

GMP is a sum of money that is paid to members of occupational pension schemes – including Local Government, Police or Firefighters’ pension schemes – who were contracted out (see our Jargon buster below) of the State Earnings Related Pensions Scheme (SERPS) between 6 April 1978 and 5 April 1997.

Before 6 April 2016, the State Pension was made up of two parts: 

  1. Basic State Pension 
  2. State Earnings Related Pension (SERPS), later renamed State Second Pension (S2P) 

If affected, GMP ensures you receive a pension that’s as good as or better than the pension you would have received under SERPS.

Please note

GMP is paid as part of your pension scheme benefits, not in addition to them.

Jargon buster

What is contracting out?

If you were contracted out of the Additional State Pension (SERPs), it just means your National Insurance contributions were either:

1. Lower than people paying into the Additional State Pension

2. Paid into another pension, such as a private or workplace pension

Note: all public service pension schemes were contracted out of SERPS. Contracting out was abolished in 2016.

Why was GMP replaced?

In 1997, the Reference Scheme Test was introduced to replace GMP (as a way to make sure schemes provided the minimum level of benefits to their members). This meant that pension schemes could only contract out of SERPS if they guaranteed a minimum level of annual income, calculated by salary.

Salary-related schemes met the criteria and so were able to continue to contract out of SERPS, but GMPs no longer applied. This is why you won’t have a GMP on a pension built up after 5 April 1997.

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