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Guaranteed Minimum Pension (GMP)

Many defined benefit pension schemes were contracted out of the State Earning Related Pension Scheme (SERPS) between 6 April 1978 and 5 April 2002. SERPS provided a top-up to the Basic State Pension. As a result, both members and participating employers paid lower National Insurance contributions. In exchange, the schemes took on responsibility for paying the equivalent ‘top-up’ pension their members would have earned through SERPS.

If you had contracted-out service between 6 April 1978 and 5 April 1997, when you were a member of the National Grid UK Pension Scheme (NGUKPS), this part of your pension is called GMP. GMP is the guaranteed minimum pension the NGUKPS had to provide to you if you had contracted-out membership during this period, once you reach GMP age. GMP age is 65 for men and 60 for women.

Under the NGUKPS Rules (and now the Cadent Gas Pension Scheme Rules), you would receive 1/60 of your pensionable salary for every year you were a contributing member of the Scheme. Your pension is made up of three elements:

  • GMP built up between 6 April 1978 and 5 April 1988 (pre-88 GMP);
  • GMP built up between 6 April 1988 and 5 April 1997 (post-88 GMP); and
  • the non-GMP excess, which is the amount of your Scheme pension above the GMP.

The GMP notionally increases in line with the Retail Prices Index (RPI) from the date you leave the Scheme until you reach GMP age. However, the Department for Work and Pensions (DWP) has agreed that pension schemes like ours can revalue your GMP at a fixed rate for each complete tax year between when you left the Scheme and your GMP age. The rate we apply as an increase to your GMP depends on when you left the Scheme, as the following table shows:

Fixed-rate GMP revaluation

Date of leaving the Scheme Fixed rate of revaluation
6 April 2017 – 5 April 2022 3.5%
6 April 2012 – 5 April 2017
4.75%
6 April 2007 – 5 April 2012 4.0%
6 April 2002 – 5 April 2007 4.5%
6 April 1997 – 5 April 2002
6.25%
6 April 1993 – 5 April 1997
7.0%
6 April 1988 – 5 April 1993 7.5%
Before 6 April 1988 8.5%

When you reach GMP age, we do a test to give you the better of the notional RPI increase and the fixed-rate revaluation, from the date you left the Scheme. If the fixed-rate increase on the GMP is higher than RPI, your pension will be increased. This is known as an ‘uplift’ and will be equal to the difference between the RPI and fixed-rate increases.

Example

GMP at exit x RPI increases
£1,400.00 a year
GMP at exit x 7% increases £2,000.00 a year
Uplift to pension at GMP age
£600.00 (£2,000.00 - £1,400.00) a year

Once you reach GMP age, the Scheme will apply the following annual increases to your pension:

Pre-88 GMP 0%
Post-88 GMP Consumer Prices Index (CPI), up to a maximum of 3%
Pension (Not GMP)
Retail Prices Index (RPI) for September of the previous year

Finally, please note that a recent High Court decision means that GMPs for some members may need to be adjusted to remove inequalities arising from the way GMPs were calculated for men and women. 

How this might impact your pension

GMP equalisation calculations might result in a higher pension being paid to you going forward; and it may also result in a backpayment being made to you representing the difference between the pension you have actually received and the higher pension you might have been paid in the past. Generally speaking, any pension increase payable is likely to be very modest. The Trustees are undertaking a wider programme of work around GMP equalisation, which among other things will ensure that no member’s pension will decrease as a result of consideration of GMPs.

The plan to carry out the GMP equalisation exercise

This is a very technical exercise with extremely complicated calculations for a very high proportion of the Scheme membership. The exercise will be done in stages and will take some time to carry out. Work has already started. At present, the Trustees are expecting the initial part of the exercise to be completed later in 2024. If so then the Trustees anticipate communicating generally to the Scheme membership as a whole at that time to inform where the exercise is up to. In addition, where a member’s pension is due to increase, each such member will be sent a personal letter explaining the effect on their pension and what the next steps are.

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