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Indexation and Equalisation of Guaranteed Minimum Pensions (GMP) from 2018

The UK government consulted between 28 November 2016 and 20 February 2017 on how GMP indexation and equalisation should be applied to public service schemes going forward from 6 December 2018. An interim solution was introduced for the period 6 April 2016 to 5 December 2018 whereby public service schemes will pay the full indexation for members reaching state pension age between these dates. The three options under consideration were:

· Case by case – an annual comparison of what a member receives under the old and new system, which would also include a further comparator to ensure equalisation;

· Full indexation - a continuation of the interim solution; and  

· Conversion - convert the accrued GMP into a scheme benefit.

The UK government has now considered the replies it received and has issued a formal response to the consultation which is available via the following link (which also provides a copy of the consultation paper): Indexation and equalisation of GMP in public service pension schemes - GOV.UK.

In brief, the case by case option has now been ruled out. It has been decided to extend the interim solution from 6 December 2018 to 5 April 2021 to allow further consideration of implementing GMP conversion as a longer-term solution. The UK government will continue to consult with departments and schemes to decide whether a suitable methodology and legislation can be developed to enable GMP conversion to take place in the future. The UK government will also continue to take account of alternative solutions that may also address this issue.

Link to Scottish Government Website