GMP INDEXATION WINNERS AND LOSERS
by Katie Payne, Partner & Max Ballard, Legal Director, Arc Pensions Law LLP The UK Government has decided to make public service pension schemes fully responsible for annually increasing public sector pensions in line with inflation. After five years of uncertainty, in March 2021 the government confirmed its chosen method for ensuring that guaranteed minimum pensions (GMPs) continue to increase annually in line with price inflation. This decision applies to all public service pensioners with a GMP who reach state pension age after 5 April 2021. While the decision primarily affects public service pension schemes, it also impacts a small number
of private sector and other schemes. The affected schemes include those whose rules mirror the public sector provisions because they were originally sponsored by a nationalised industry such as Royal Mail or BT. Past governments gave unequivocal commitments to public servants that their guaranteed minimum pensions would continue to increase in line with price inflation each year. These increases were met through combining increases in the state pension with additional increases made through the public service scheme. However, the 2016 introduction of
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