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:
- Basic State Pension
- 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.
You will have a GMP if you paid into your occupational pension scheme before 5 April 1997 (GMP stopped being built up from 6 April 1997). It will be paid to you as part of your pension when you reach age 60 (for a woman) or 65 (for a man).
Each April, the pension increase is applied to GMP for pensions in payment. The responsibility for paying increases on the GMP portion of your pension may be shared between your occupational scheme and the Government, depending on your dates of service and when you reached state pension age.
How the increase is applied depends on when you reached state pension age:
Before 5 April 2016
- For GMP earned between 6 April 1978 and 5 April 1988 (Pre-1988 GMP) – increases in GMP are included in your State Pension
- For GMP earned between 6 April 1988 and 5 April 1997 (Post-1988 GMP) – the first 3 per cent of increases on GMP is included in your Local Government, Police or Firefighters’ pension. Any excess (if applicable) is paid as part of your State Pension
After 5 April 2016
- Increases in GMP will be included in your Local Government, Police or Firefighters’ pension (for both Pre-1988 and Post-1988 GMP)
If you have a GMP, you can defer taking it while you are still working. But once you are no longer in employment, you must start taking it – even if you defer the rest of your pension benefits (up until your 75th Birthday). Just remember, if you do choose to take your GMP right away, it will reduce the amount of lump sum you can receive.
To learn more about your pension benefits and lump sums, visit the Your pension benefits FAQs on our Help Hub.
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.
