Pillar Guide · Updated July 2026

Guaranteed Minimum Pension (GMP): A Complete UK Guide for 2026/27

If you or your pension scheme mention "GMP", it relates to defined benefit pension built up between 1978 and 1997 while you were contracted out of the old Additional State Pension. This guide explains what GMP is, how it is calculated, GMP equalisation, and how it affects your State Pension.

Last updated: 10 July 2026Last reviewed: 10 July 2026How we verify

What GMP Is

A Guaranteed Minimum Pension is the minimum amount a defined benefit workplace pension scheme had to promise to pay a member, in place of the equivalent additional State Pension the member gave up, if the scheme was "contracted out" between 6 April 1978 and 5 April 1997. In exchange, both the employer and employee paid a reduced rate of National Insurance during those years, because the state was no longer building up that portion of Additional State Pension for the member.

Contracting Out Explained

From 1978, employers could choose to run their defined benefit scheme on a contracted-out basis. This meant:

Employees paid a lower rate of National Insurance (a rebate reflecting the additional state pension they were forgoing)
The scheme had to guarantee a pension at least equal to the GMP — broadly what SERPS/State Second Pension would otherwise have paid
From April 1997, the GMP basis was replaced by a different underpin (the Reference Scheme Test), so no new GMP built up after that date, though GMP already accrued did not disappear
Contracting out for defined benefit schemes ended entirely on 6 April 2016 with the introduction of the new State Pension

How GMP Is Calculated

GMP is calculated by the scheme (historically checked against HMRC records) based on your earnings between the lower and upper earnings limits for National Insurance during each tax year you were contracted out, using a formula set by the Department for Work and Pensions. Because the formula and record-keeping span nearly two decades and multiple employers for many people, GMP amounts are often only a modest part of a total pension, but they carry legally protected guarantees around payment age and increases that ordinary scheme pension does not always have.

GMP Equalisation

GMP built up differently for men and women because it was originally linked to different State Pension ages (65 for men, 60 for women) and different accrual rates. A landmark 2018 High Court ruling involving Lloyds Banking Group schemes confirmed that this produced unequal outcomes and that trustees must equalise benefits for the effect of unequal GMP between men and women for service from 17 May 1990 (the date of an earlier European Court ruling on pension equality) onwards. Many defined benefit schemes have spent years recalculating affected members' benefits; some members have received small back-payments or adjusted future pensions as a result. If your scheme has written to you about GMP equalisation, it is a routine legal correction exercise, not a sign of a problem with your pension.

GMP and Your State Pension

When the new State Pension launched on 6 April 2016, everyone with National Insurance history under the old system had a one-off "starting amount" calculated, comparing what they would have received under the old rules against the new rules and using the higher figure. Periods of contracting out reduced the old-system Additional State Pension entitlement (because the scheme, not the state, was paying that part via GMP), which is one of the main reasons two people with the same number of qualifying years can end up with different new State Pension starting amounts. This is a background calculation rather than something you need to manage day to day, but it explains why a state pension forecast and years of National Insurance contributions do not always translate into a simple, predictable pension amount for people who were contracted out for long periods.

Annual Increases

How your GMP increases once in payment depends on when it was built up: GMP earned before 6 April 1988 generally receives no scheme-provided increase once in payment; GMP earned from 6 April 1988 to 5 April 1997 must be increased by the scheme each year, capped at 3%, historically with any additional inflation increase (above the scheme's 3% cap) reflected through the state system for people who reached State Pension age before the new State Pension started. These rules are a legacy of the contracted-out system and can make like-for-like comparisons between two similar pensions confusing without a full breakdown from the scheme administrator.

What to Do

Ask your pension scheme administrator for a breakdown showing any GMP element of your benefits and how it increases
Check your State Pension forecast on GOV.UK and, if the figure looks lower than expected, ask about any contracted-out deduction reflected in your starting amount
If your scheme has written to you about a GMP equalisation exercise, read the letter but do not assume it is an error — it is usually a routine correction
Take regulated financial advice before transferring a defined benefit pension that includes GMP rights, especially if the transfer value is above the statutory advice threshold

Official References

FAQs

What is a Guaranteed Minimum Pension?

A Guaranteed Minimum Pension (GMP) is the minimum pension a workplace scheme had to promise members who were "contracted out" of the old Additional State Pension (SERPS, and later State Second Pension) between 6 April 1978 and 5 April 1997. In exchange for lower National Insurance contributions, the scheme took on the job of paying at least this GMP amount instead of the state paying the equivalent additional pension.

Does GMP still apply if contracting out ended in 2016?

Contracting out ended on 6 April 2016 when the new State Pension replaced the old two-tier system, but GMP built up before that date is still a real, protected part of many people's pension. If you were in a contracted-out defined benefit scheme at any point between 1978 and 1997, your scheme is likely still required to pay at least your GMP alongside any other pension built up.

Why does GMP mainly affect people who worked before 1997?

Contracting out on a GMP basis was only used from April 1978 to April 1997; after that, contracted-out schemes moved to a different basis (Reference Scheme Test, later Contracted-out Salary Related). So GMP specifically relates to defined benefit service in that 19-year window, which is why it mostly affects people now over State Pension age or approaching it.

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What is GMP equalisation and why did it happen?

GMP builds up at different ages and rates for men and women because the underlying State Pension age rules were originally different. A 2018 High Court ruling (Lloyds Banking Group case) found this created unequal pension outcomes between men and women and required schemes to equalise GMP benefits. Many schemes have spent years since then recalculating historic benefits and, where necessary, making back-payments or adjustments.

How does GMP affect my new State Pension?

Your new State Pension was calculated using a "starting amount" as at 6 April 2016, which took into account any deduction for periods you were contracted out (broadly reflecting the GMP or equivalent your scheme was expected to pay instead of the state). This is one reason two people with an identical work history can have different new State Pension starting amounts if one was contracted out for longer.

Does my GMP increase each year?

It depends on when it was earned and who is responsible for increasing it. GMP earned before 6 April 1988 generally receives no scheme increase in payment. GMP earned from 6 April 1988 to 5 April 1997 must be increased by the scheme up to 3% a year, with the state historically topping up any excess CPI increase through the Additional State Pension mechanism, though the practical detail depends on your National Insurance record and scheme rules.

Can I find out my GMP amount?

Your workplace pension scheme administrator should be able to confirm your GMP amount, as it will have been recorded when you were contracted out. HMRC also held historic contracted-out records, though its former GMP checker service for members has been phased out; your scheme administrator or the pension provider is now the primary source.

What is a GMP rectification exercise?

A rectification exercise is where a pension scheme reviews historic GMP records — often prompted by HMRC's GMP reconciliation project between schemes and HMRC — and corrects any mismatches between what the scheme has recorded and what HMRC's National Insurance records show, which can occasionally result in a small increase or decrease to your pension.

Does GMP affect when I can take my pension?

GMP normally becomes payable at GMP pension age — 65 for men and 60 for women — which is different from your scheme's normal pension age or your State Pension age. If your scheme lets you take your main pension earlier or later, the GMP element may still need special treatment to make sure you receive at least the guaranteed amount from GMP pension age.

Should I get advice about GMP if I am transferring my pension?

Yes. GMP rights include valuable guarantees, and transferring a defined benefit pension with a GMP underpin away from the scheme, or converting GMP into ordinary scheme benefits, is complex. If the transfer value is above the regulatory advice threshold you will be legally required to take independent financial advice; even below that threshold, professional advice is strongly recommended given how GMP interacts with State Pension and scheme increases.

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About the author

Emma Clarke

UK Tax Writer

Emma Clarke has been writing about UK personal tax since 2018, with a particular focus on Self Assessment, PAYE coding and the practical mechanics of how HMRC actually applies the rules to ordinary salaries. Her work concentrates on translating the dense language of HMRC manuals and Finance Act schedules into worked examples that show, pound by pound, how income tax and National Insurance reduce a gross salary to the figure that lands in a UK bank account. Emma covers the full PAYE lifecycle: tax codes (1257L, BR, K codes, emergency codes), the Marriage Allowance, the High Income Child Benefit Charge, salary sacrifice arrangements and their effect on pensionable pay, the Apprenticeship Levy, and the differences between the rUK and Scottish income-tax regimes. She is particularly interested in the edge cases that catch PAYE employees out — the £100,000 personal-allowance taper, the 60% effective marginal rate it creates, and the interaction between student-loan plans and pension contributions. Every figure in Emma's articles is verified against the current HMRC rates pages and worked through a Self Assessment calculation by hand before publication. She writes to CalcHub's editorial standards: primary-source citations, plain English, no promotional language, and clear "this is general information, not financial advice" disclaimers where appropriate.

Personal-finance writer since 2018
UK tax specialism — PAYE, Self Assessment, National Insurance
Writes to CalcHub editorial standards (primary-source citation, annual review)

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Disclaimer: GMP rules are complex and scheme-specific; contact your scheme administrator for your own figures. This guide is general information, not financial, legal or tax advice. Always seek independent professional advice for your specific situation.