Glossary · UK
What is Guaranteed Minimum Pension (GMP)?
The minimum pension a contracted-out defined benefit scheme must provide, broadly equivalent to the SERPS benefit the member gave up between 1978 and 1997.
Full Definition
Guaranteed Minimum Pension (GMP) is the minimum pension that a contracted-out occupational defined benefit scheme was required to provide to members who were contracted out of the State Earnings-Related Pension Scheme (SERPS). GMPs accrued only during the contracted-out period, which ran from 6 April 1978 to 5 April 1997, when contracting-out on a GMP basis ended for defined benefit schemes. The GMP was broadly intended to replicate the SERPS entitlement the member gave up. There are separate GMP accrual rates for men (retiring at 65) and women (retiring at 60), which historically led to inequalities in total pension benefits. Following the Lloyds Banking Group case decided by the High Court in 2018, UK pension schemes are required to equalise GMPs between men and women. This is a complex and ongoing exercise for many schemes. GMPs carry statutory increases in deferment (fixed-rate revaluation or Section 148 orders) and limited increases in payment (CPI up to 3% for post-1988 GMP). Members with GMP rights should check their scheme's equalisation approach when reviewing transfer values or pension quotations.