GMP Equalisation Explained

GMP Equalisation title with an image of balanced scales.

In 2018, a court ruled that pension schemes must ‘equalise’ the Guaranteed Minimum Pension (GMP) benefits for men and women. Currently, they are linked to the old state pension ages of 60 (for women) and 65 (for men).

GMPs are intended to be paid from the old state pension ages for men and women alike, (their ‘GMP age’), however they are not paid as well as a pension. This is because it is already included within the make-up of the pension. That said, the different starting ages for men and women can, in some instances, create inequality.

The majority of private sector pension funds (non-LGPS funds), the GMP is handled separately to the main pension and therefore attracts a different rate of increase. Any GMP built up between 1978 and 1988 ceases to increase once a member reaches GMP age and begins receiving payment of it. However, any GMP built up between 1988 and 1997 is increased in line with the main pension, capped at 3%.

This is different for public service pensions like the LGPS. The GMP isn’t treated as a separate ‘pot’, until the member retires. So, the GMP is treated in the same way as the scheme pension.

When you reach state pension age as an LGPS member:

  • If your GMP comes into effect after 5 April 2016 – public service pension schemes like the LGPS must increase GMPs in line with the rest of the pension. That means it is treated no differently to the rest of the pension scheme and is ‘equalised’.
  • If your GMP comes into effect before 6 April 2016 – any increases applied to GMPs are divided between the Government and the pension scheme. The only point of differentiation between this method and that employed when people reach State Pension age after 5 April 2016, is that the increase is paid by two bodies, rather than one. Because all parts of the pension get full increases, the scheme pension is, as before, ‘equalised’.

Since that ruling in October 2018, a further ruling was made in November 2020 confirming that historic GMPs should also be equalised. This could impact some members of the LGPS – mainly any members who hold a GMP and transferred out of the scheme after 1990. The Government are currently reviewing this ruling to see if it applies to all historic transfers made by all public service pension schemes (which includes the LGPS).

We Await the Government’s decision as a result of this review before we can take any action but will update members in due course.

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