mnrpf and the state pension
Whilst you were a contributing member of the Fund you may have been contracted out of the State Earnings Related Pension Scheme (SERPS). If so, both you and your employer would have paid lower National Insurance Contributions. Members that were contracted out were done so by reference to their employer and most participating employers in the Fund were contacted out.
If you were contracted out of SERPS before 6 April 1997, the Fund is required to make sure that your pension from the Fund is at least broadly the same amount as the pension you would have received had you remained in SERPS. This minimum amount is known as Guaranteed Minimum Pension or GMP and must be provided from your GMP Age (currently 60 for females and 65 for males).
As the Fund is required to check that your pension at your GMP age is at least equal to your GMP, the benefits available on retirement may be limited:
- You may not be able to retire early, or as early as you would like if after reduction for early payment your pension is not enough to cover your GMP at GMP age,
- The amount of tax-free cash may need to be limited to make sure your pension is enough to cover your GMP at GMP age
If you have retired before GMP age, the pension you are receiving at GMP age is tested against the minimum pension (GMP) payable to you. In a few cases, the amount being paid is lower than the minimum pension and the shortfall is paid as a “step-up” pension. You will be contacted on or around your GMP age if you are due a “step-up” pension. For most members, the amount of pension they are receiving does NOT change at GMP age as their pension is higher than the minimum pension their pension is tested against.
Once you have reached GMP age and are receiving a pension, you will notice a change in the information provided on your monthly payslip. Your pension will be split into different elements and your GMP will be shown separately to the rest of your pension. We show the different elements to your pension as these increase at different rates:
Any GMP earned before April 1988 (identified as on your payslip) does not increase in payment.
Any GMP earned after April 1988 (identified as on your payslip) increases in payment each year in line with CPI inflation to a maximum of 3% pa.
high court ruling on gmp equalisation
On 26 October 2018, the High Court ruled that DB schemes like the MNRPF must equalise GMPs for men and women, and update their rules as a result.
The background to this is that in 1990, the Courts had ruled that occupational pension schemes must equalise the normal retirement ages for men and women (for example, a scheme which had a normal retirement ages of 60 for women and 65 for men might have opted to equalise the retirement ages to 65 for women as well as men).
However, GMPs were not required to be equalised in this way and can result in inequality because:
- GMPs are payable at age 60 for women and 65 for men
- GMPs attract different increases before and after retirement
- GMP increases can be lower than scheme increases on non-GMP elements
Like many other occupational pension schemes around the UK, the MNRPF is now working with its advisers to decide how it will carry out GMP equalisation. The process is complicated and may be affected by future developments, such as further court proceedings, or guidance or legislation from the Government.
At present, it is not possible to say definitively what impact the High Court ruling will have, nor what the next steps will be. We will provide you with an update when more details are known.