How are increases applied from your State Pension Age?
From your State Pension Age (SPA) payment of the increases to your pension may be shared between your pension fund and the Government. This is because the LGPS guarantees to pay you a pension that is at least as much as you would have earned had you not been contracted out of the State Earnings Related Pension Scheme (SERPS) at any time between 6 April 1978 and 5 April 1997. This is called the Guaranteed Minimum Pension (GMP).
This GMP forms part of your LGPS pension (it is not paid in addition to it) and the Government is responsible for paying part of the cost of living increases on it, as below:
|Guaranteed Minimum Pension (GMP) earned between 6 April 1978 and 5 April 1988||Pension increases are paid by the State with your State Pension|
|Guaranteed Minimum Pension (GMP) earned between 6 April 1988 and 5 April 1997||The first 3% of the pension increase is paid by your LGPS pension fund. Any increase above 3% will be paid by the Government with your State Pension|
|Pension in excess of Guaranteed Minimum Pension||Pension Increases will be paid in full by your LGPS pension fund.|
However, the above does not apply if you reach State Pension Age between 6 April 2016 and 5 April 2021 as your LGPS pension fund will be responsible for payable the full increases to your pension including the GMP amount.
The GMP part of your pension will receive a full years increase even if the rest of your pension is receiving a proportion of the increase because you retired part way through the year.
Contracting out - more information
Before 6 April 2016 the State Pension was made up of two parts, the basic State Pension and the additional State Pension. The additional State Pension part was known as the State Earnings Related Pension Scheme (SERPS) from 1978 followed by the Second State Pension (S2P) from 2002. How much additional State Pension you received depended on your National Insurance contributions.
As a member of the LGPS you were automatically contracted out of the additional State Pension between 6 April 1978 and 5 April 2016. This means that during this period, and whilst you were a member of the LGPS, you would not have not been built up much, if any, additional State Pension; you have been building up pension benefits in the LGPS instead.
The rules have changed over the years but for the period from 6 April 1978 to 5 April 1997 the amount of additonal pension you would have earned had you not been contracted out of the additional State Pension is called your Guaranteed Minimum Pension (GMP). This GMP forms part of your LGPS pension (it is not paid in addition to it).
From 6 April 2016 the Government introduced a new single tier State Pension; this will replace the basic and additional State Pension and ends the contracting out of the additional state pension. The new State Pension will be payable to you if you reach State Pension Age on or after 6 April 2016. For more information about your State Pension age and the new State Pension please refer to the Government's website.