Indexation and equalisation of GMP in public service pension schemes

On 6 April 2016 the government introduced the new State Pension (nSP), designed to radically simplify pension provision, while ensuring that pensioners have security in retirement. Among the layers of complexity that are being removed is the Additional State Pension (AP) – a complex earnings related element of the old state system.

With the removal of the AP the government needs to consider how public service pension payments for a group of members should be increased in future. Specifically those who have accrued a guaranteed minimum pension (GMP) and reach State Pension age after 5 December 2018. If the government does not take action, an inequality in the payment of public service pensions between men and women may be introduced.

The government is today publishing a consultation on how best to treat GMPs for affected members of public service pension schemes. The consultation considers various options for addressing the issues of equalisation and indexation of the nSP reforms.

The government is separately consulting on a method by which private sector pension schemes can address the inequalities inherent in private pensions as a result of GMPs. While this consultation may be appropriate for private sector employers, the government does not consider this an appropriate method for public service pension schemes to meet their indexation and equalisation obligations.

Affected members of the public and interested bodies are invited to respond to the consultation. The government will carefully consider the responses before announcing a policy decision.