GMPs: Basics

Guaranteed Minimum Pensions (GMPs) were introduced from 6 April 1978 to allow occupational DB pension schemes to contract-out of the second tier of state pension provision (now the State Second Pension).

Schemes which were contracted-out on a GMP basis must provide members with benefits which are no less than a specified minimum, so that a contracted-out member does not lose out because they no longer receive all the elements of the state pension. Although there has been no further accrual of GMPs since 5 April 1997, schemes still need to administer the GMP rights accumulated up to that date.

Reflecting their status as replacement state benefits, there are complex rules governing GMPs. As well as being separately tracked and monitored by the scheme, they must be used to provide specified benefits for survivors.

Since 6 April 2009, provided certain conditions are met, it has been possible for schemes will be able to convert GMPs into ordinary scheme benefits. 

Author: Zoe Murphy