Do you have a question about GMP or GMP equalisation? Check below for the answer.
What is GMP equalisation and how did it come about?
- 1. What is Guaranteed Minimum Pension (GMP)?
Your GMP is part of your pension from the Scheme. It replaces part of the State Pension.
Before April 2016, the State Pension was made up of two parts: the flat-rate Basic State Pension, and a second level of State Pension linked to earnings. This was called the State Second Pension (or ‘S2P’), and before that, the State Earnings Related Pension Scheme (or ‘SERPS’).
From 6 April 1978, pension schemes could ‘contract out’ of SERPS. This meant that both employers and employees would pay lower National Insurance contributions, and the pension scheme had to provide a certain level of benefit in place of the SERPS pension the employee would be giving up.
For pension schemes like ours, this minimum level is the GMP. The amount of GMP and the way it must be increased in payment is set by legislation.
People stopped building up GMPs from 6 April 1997.
- 2. What is GMP equalisation?
For workplace pension schemes that were contracted out of SERPS (and later the State Second Pension), GMPs remain unequal in some cases.
GMP equalisation is the action all such pension schemes must take to adjust pensions for the effect of unequal GMPs. This is only required in respect of GMPs built up from 17 May 1990.
- 3. How did GMP equalisation come about?
In the past, State Pensions were paid to men and women at different ages (65 for men and 60 for women), but were gradually equalised so that by November 2018, men and women had a State Pension age of 65.
However, GMPs are still payable from age 65 for men and age 60 for women. Also, men and women could build up GMPs at different rates.
In 1990, the European Court of Justice ruled that all UK pension schemes had to treat pensions equally for men and women for benefits built up after 17 May 1990, including the same pension age.
But the rules governing GMPs were set in legislation and as State Pension ages were still different, GMPs did not adjust in line with this ruling. As a result, GMPs remained unequal in some cases.
Following a High Court ruling in October 2018, UK workplace pension schemes must now put this right by adjusting pensions for any unequal GMPs included in the pension.
- 4. What was the High Court ruling?
Unequal GMPs became a legal issue when three members of the Lloyds Banking Group’s pension schemes claimed sex discrimination on the basis that their GMP meant that their pensions increased at a different rate than members of the opposite sex. The High Court ruled in the members’ favour in October 2018.
The result of this ruling is that all affected pension schemes are legally required to address any inequality for pensions earned after 17 May 1990. The judgment provided a number of options for doing this.
All affected UK pension schemes need to act on the High Court’s decision.
Who is affected and how?
- 5. Which members could be affected?
The High Court decision is likely to affect some members, some beneficiaries relating to former members, and some former members who have a GMP built up between 17 May 1990 (when the equal pension rules started to apply) and 6 April 1997 (when GMPs stopped building up).
It could affect men and women, pensioners and non-pensioners and former members who previously transferred their benefits out of the Scheme.
- 6. Will you write to every current member?
No, if you did not build up any GMP between 17 May 1990 and 6 April 1997, you will not be affected. In this case, your benefits do not need adjusting as a result of the High Court decision.
- 7. When will you write to affected members?
We will be writing to impacted members in stages:
- For SALPS members this is likely to be between September 2022 and Summer 2023.
- For RIGPS members this is likely to be between November 2023 and Autumn 2024.
Please be assured that if you are affected, we will write to you individually with full details.
Finally, we will be writing to former members who transferred out of either SALPS or RIGPS and who may be impacted by GMP equalisation in due course. These calculations are particularly complex and we do not expect to be in a position to contact impacted former members for some time yet. We will update this page when we have more information to share.
- 8. If I am affected, how much money could I get?
Some members may receive an increase to their pension, but we expect any increase to be relatively small.
Some members may receive a one-off additional payment to cover any missing pension they should have received up to now. Where this is the case, the additional payment will include interest.
Some members may receive both an increase to their pension and a one-off additional payment.
Some former members may be due a one-off additional payment to cover any missing payment that should have been included when they transferred out.
- 9. If I am affected, will my benefits definitely increase?
Not necessarily. Your pension may be higher than if you had been of the opposite sex and so you may not have been disadvantaged. And even if you have been disadvantaged, since GMP is usually a small part of a pension, you might see little difference to your overall pension.
- 10. Could my benefits go down as a result of GMP equalisation?
No, your pension will not go down.
- 11. I receive an increase every April on my GMP, will this be affected?
No, any increase payable on your GMP will be paid as normal with your April pension payment.
- 12. How will you review my Scheme pension?
We will work out the amount of pension you built up between 17 May 1990 and 5 April 1997. For some members, we will also look at the benefits built up after 5 April 1997.
We will then work it out again over the same period, but as if you were a member of the opposite sex (the ‘alternative’ pension). Everything else about the calculation will be the same: for example, your age, salary, and the date you retired.
The calculation will tell us:
- whether your current pension is lower than the ‘alternative’ pension would be – and if so, we will increase your current pension; and
- whether you have received a lower pension than the ‘alternative’ pension in past years – and if so, we will pay a one-off additional payment (which includes interest) to make up the difference.
When working out your pension increase in future, we will check that we are treating benefits equally for men and women and allow for this in your pension.
- 13. Did the Scheme already equalise GMP in the past?
The Scheme did previously equalise GMPs for male members who left pensionable service before 1 January 2006.
If you fall into this category and if it was deemed necessary, your pension at retirement was uplifted to allow for GMP equalisation. However, following the High Court ruling in 2018, which provided confirmation of acceptable methods for schemes to equalise benefits for unequal GMPs, an exercise has been carried out to determine whether you are due an additional uplift.
The Trustee and Company have agreed that any uplift previously provided should not be reduced and so your pension cannot reduce as a result of this exercise.
- 14. Will GMP equalisation impact my State Pension Deduction (SPD)?
Equalising your GMP has no impact on the amount of SPD already deducted nor does it change the basis for the calculation of any SPD due to be applied in the future.
- 15. How will you review past transfers out?
In the original judgment, the Court did not rule on the treatment of members who have already transferred out of a scheme where they built up GMPs between 1990 and 1997.
Further Court hearings on the treatment of transferred benefits took place in 2020 with a judgment handed down in November 2020. We’re working through the implications of the judgment and we will update this information once we know the outcome.
- 16. If I am due an increase and/or additional payment, will I need to do to anything?
No, we will contact you if your Scheme pension needs to increase or if there is a one-off additional payment. We will then increase your pension or pay the additional payment, or both.
If you receive an increase or additional payment, you may need to consider your tax position. See questions 20-21 for more information.
- 17. If I am due an additional payment, how will you calculate the interest?
We will use the interest rate as prescribed in the High Court ruling, which is the Bank of England base rate plus 1%.
- 18. What if I am due to retire?
Where possible, we will continue to start benefits without any adjustment, until we are in a position to calculate if they need to increase. We will then let you know if any additional payments become due.
- 19. What if I want to transfer out of the Scheme now?
Updating how transfer values are calculated to take account of GMP equalisation is a complex task which is currently being completed on a phased basis. If we give you a quotation for your transfer value (before we have completed our equalisation work), you can still use it to transfer out if you would like to. Then, if you are due an additional payment in the future because of GMP equalisation, we would usually aim to pay it to you by transferring it to your new scheme at that time. For that reason, you might want to let your new scheme know that there may be an additional payment due in the future.
If you ask for a transfer value quote, or if you are already in the process of transferring out, and your transfer quotation does not take into account any GMP equalisation adjustment you might be entitled to, we will make this clear in the paperwork.
- 20. Are there any potential tax implications if I receive an increase and/or additional payment?
Any changes may affect your tax position because:
- If your pension increases, this could push your yearly income into a higher tax bracket.
- If you receive a one-off additional payment, this could push your income for the year into a higher tax bracket. This would mean you might have to pay more tax for the year in question than if you had received the right level of pension in the first place.
If this happens, you can apply to HM Revenue & Customs (HMRC) to spread the tax that is due over the previous years to which the additional payment relates. See question 21.
- If you are close to the Lifetime Allowance and you receive a one-off additional payment, the percentage of Lifetime Allowance you used up when your pension started may change. And if the increase is more than a permitted maximum, this may also affect your Lifetime Allowance. (See the below section ’If you are close to the Lifetime Allowance or have certain Lifetime Allowance protection’.)
Separately, although very rare, if you have Enhanced Protection, you could lose it in the future due to the rules around GMP.
If you are close to the Lifetime Allowance or if you have Enhanced Protection, you should take independent financial advice. See question 24.
Remember: it is your responsibility to check your position against the Lifetime Allowance.
- 21. If I receive an additional payment, how can I claim back any tax I overpay?
Please contact the administrators (see question 23) and ask for a ‘GMP statement’. This will include two copies of a table showing your past underpayments in each tax year.
Write to HMRC using the letter template below and enclose one copy of the underpayments table from the GMP statement.
HMRC will respond to your letter.
Please note: as it is your responsibility to keep an eye on your tax position, you must write to HMRC yourself – we cannot make the claim on your behalf.
Help and support
- 22. What support is available?
Please refer to these ‘GMP equalisation’ pages of the website for background information and what is happening.
- Our overviewvisual guide to applying GMP equalisation is a good place to start.
- And we have provided information on how your tax position could be affectedhow your tax position could be affected.
We will update these pages, including these FAQs, as we make progress, so remember to come back if you have a query.
We will also provide general updates in future Trustee Newsletters.
And remember, we will write to you individually with full details if you are affected. Plus, if you have a general question not covered here, you can contact the administrators (see question 23).
- 23. Who can I contact with a question?
If you have a general question about GMP equalisation, your benefits, or the Scheme, please get in contact using any of the details below.
- Phone 01737 227 547
- Email RSApensions@wtwco.com
- Write to: RSA Pensions, PO Box 545, Redhill, RH1 1YX
Please note: the administrators cannot give you financial advice or answer any specific questions as to how you may be affected.
- 24. Where can I get financial advice?
Neither the Trustee of the Scheme, the Willis Towers Watson administration team nor anyone at RSA can legally provide you with financial advice.
If you need advice, you should talk to an independent financial adviser (IFA). If you do not have an appointed IFA, you can find one using MoneyHelper’s online directory.