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Guaranteed Minimum Pension (GMP) - General FAQs

Have you received a letter regarding a change to your pension due to Guaranteed Minimum Pension (GMP) Rectification? 

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What is GMP?

A GMP is a Guaranteed Minimum Pension that a workplace pension scheme normally provides. It only applies to people who were contracted out of the Additional State Pension Scheme from 6 April 1978 to 5 April 1997 whilst a member of the Fund. In most cases the pension paid to you from the Local Government Pension Scheme (LGPS) is higher than the GMP.

The GMP is split into 2 elements, Pre 88 (for the period from 6 April 1978 to 5 April 1988) and Post 88 (for the period from 6 April 1988 to 5 April 1997). It’s payable from age 60 for Females and from 65 for Males, subject to the changes in State Pension Age. 

What is contracting out and why did this apply to my pension? 

Prior to 6 April 2016, LGPS members were contracted out of the Additional State Pension, previously known as the State Earnings-Related Pension Scheme, or SERPS. This allowed members to pay a lower rate of National Insurance contributions.

Why does a difference in GMP affect my pension?  

The GMP affects the overall payment of your pension because of the Annual Pensions Increase that is applied. The payment increases at a different rate to other elements of your pension and the responsibility for paying Pensions Increase is split between HMRC and the Pension Fund. Having a different GMP recorded on your record has resulted in both the Pension Fund and HMRC paying Pensions Increase on the GMP element.  

What are the changes to my Pension?

Why is my pension changing? 

The Scheme Rules determine the benefits payable to members; members are only entitled to payments in accordance with these Rules. As a discrepancy has been identified by HMRC, the Nottinghamshire Pension Fund is required to take action to ensure that payments made, going forward, are correct. 

Why did this issue occur?

As the GMP applied to your pension at State Pension Age differed from that recently notified by HMRC, it affected the amount of Pensions Increase that was applied annually to your Pension.  

  • It is the Fund’s responsibility to pay Pensions Increase on the Post 88 GMP up to a maximum of 3%. 
  • It is HMRC’s responsibility to pay Pensions Increase on the Pre 88 GMP and anything over 3% on the Post 88 GMP. 

The GMP amounts held by the Fund differed from those of HMRC and therefore the Pensions Increase was paid by both the Scheme and HMRC, resulting in an overpayment.