Easy, peasy...
GMPe queasy?
GMP has been giving the industry a headache since 1990.
(Guaranteed Minimum Pension)
The idea, quite simple really, was to give an individual whose employment had been contracted out of the State Earnings Related Pension Scheme between 6 April 1978 and 5 April 1997 broadly equivalent benefits as if they had stayed in.
The trouble was this fell foul of the courts on age discrimination grounds and the industry has been trying to figure out how to put that right by equalising benefits ever since.
GMPe communications:
easy, peasy, lemon squeezy...
We can’t help individual schemes with the equalisation process and we know that this isn’t an easy process - far from it!
Unfortunately there’s not much we can do about that, but what we can do is help schemes communicate the changes to members in a simple and understandable way.
That's why BA Pensions, Brightwell (representing the BT Pension Scheme), Coal Pension Trustees, Invensys Pension Scheme, M&S Pension Scheme, Royal Mail Pension Plan, Shell Contributory Pension Fund, and Unilever UK Pension Fund have partnered with Quietroom to provide a GMP communications toolkit and animation that schemes can use to help them talk to their members. Best of all it’s free!
You can find out more about the schemes who collaborated on this project and Quietroom here.
Download GMPeasy Toolkit
Kim Gubler, Chair of PASA, commented:
We know communicating GMPe is a real challenge because it’s such a complex subject, and so we’re really pleased to see an industry initiative which will support schemes explain how GMPe affects pension savers in a straightforward way. We believe this could drive consistency in communication across the industry, which would be incredible. This will be particularly important where people have multiple employers across their working lives. They could be receiving GMPe communications from several different sources, and if they all look different this will be so confusing. GMPe may be very complicated, but your communications don’t have to be.
Recipe for success?
We know every scheme is different and has its quirks. But what we wanted to do was to provide the high-level words that schemes can use as a basis for their communications, along with a simple animation that can be shared with members to give an overview.
So mix and match, cut and paste, and tweak to your heart’s content - and feel free to use what we’ve created. Just bear in mind that this has been through many rounds of review and has been tested on actual, yes real-life, members.
To use the material, whether the words or animation, all we ask is that you fill in your scheme’s details below. We won’t spam or market to you…. we just want to know who wants to use it.
Although these comms have had legal input, we do ask that you make sure the material is suitable and correct for your scheme as we can’t assume any liability for any inaccuracies or omissions.
Top tip:
When you write to members, you should start by explaining who you are and why you’re writing to them (the trustees of a pension scheme you’re part of) and why you’re writing to them now (because they might be due a small increase to their pension). You should write separate letters for people on a spouse’s pension, so you can explain their position clearly to them.
Essentials
We recommend that your initial letter to members only includes the ‘essentials’ paragraphs below.
Summary: You might be due a small increase in your pension
Due to a legal change, all pension schemes like ours have to check that men and women are being treated equally. We might find that you are due a small increase to the pension you receive from us, or we might find your pension doesn’t need to change. We will not reduce your overall pension. You don’t have to do anything. We will let you know if your pension is going up, by [date].
Download GMPeasy Toolkit
We are checking your pension because you have ‘GMP’
You have a type of pension called defined benefit. When you retire, this pension gives you an income for the rest of your life.
This kind of pension can be made up of different parts that you build up over your working life. The value of each part will depend on when you were employed and the pension rules at that time.
One part of your pension is called ‘Guaranteed Minimum Pension’ (GMP). In most cases, GMP is only a small part of someone’s pension. Because of a legal change to GMP, we need to check your pension and increase it if necessary.
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Your GMP can be affected by your sex
The legal change applies to any GMP that you built up between 1990 and 1997. The rules for how GMP built up were based on the way the State Pension worked at that time, which was different for men and women. As a result, men and women could build up different amounts of GMP, even if they worked for the same period of time on the same pay. Sometimes this could mean a man is better off, and sometimes it could mean a woman is better off.
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We need to make sure the sexes are treated equally
We have to check that men and women are being treated equally in our scheme. To do this, we will work out how much GMP you would have built up if you were the opposite sex. If this would have resulted in a higher overall pension, you could be due a slightly higher pension now. If it would have resulted in a lower overall pension, there will be no change to your pension.
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Your overall pension will either go up or stay the same
Retired members will see a change before others
If you are getting a spouse’s pension, you could also be affected
If you are the husband, wife or civil partner of the original member of the scheme, you’re getting a spouse’s pension. Your spouse’s pension is based on your husband, wife or civil partner’s pension. Since their pension included GMP, we need to work out how much GMP they would have built up if they were the opposite sex. If this would have resulted in a higher overall pension for them, we need to increase your pension now. If it would have resulted in a lower overall pension, there will be no change to the pension you’re getting.
Download GMPeasy Toolkit
Some members might get a small one-off back payment
You don’t have to do anything – we will contact you if you are affected
There’s nothing you need to do while we carry out our checks. If you’re affected, we’ll be in touch to let you know, by [date]. If you’re due an increase to your pension, we expect you will start getting higher pension payments from [date].
If you have any questions in the meantime, please contact the administration team as normal on [contact details]. If you want to know more about GMP, please visit the scheme website at [website].
Download GMPeasy Toolkit
More information
These paragraphs will work well on your scheme website, which you can direct members to if they want to know more.
An increased pension or one-off back payment could affect your tax or benefits
There’s a chance that an increase to your pension affects benefits you’re getting, such as Pension Credit. Also, if your current pension puts you very close to a higher income tax band, an increase might push you into paying a higher rate of tax on the extra income.
If you’re due a one-off back payment for any extra pension you should have got in the past, you might have to pay tax on it. We’ll tell you more about this if you are due a one-off back payment.
If you have any questions or concerns about tax, please contact HMRC or speak to a financial adviser.
Download GMPeasy Toolkit
If you transferred your pension, or do in future, you could still be affected
If you transferred your pension out of this scheme into another, we will check if the change to GMP rules means that amount should have been higher. If so, we can put the extra money in your new scheme, if that scheme’s rules allow. Otherwise, we can put it in your bank account.
If you transferred a pension into this scheme from somewhere else, the administrators of that scheme should contact you if you’re affected by the change to GMP rules.
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We plan to convert your GMP to normal pension [if applicable]
After we have checked and updated pensions, we plan to convert your GMP. That means it will stop being GMP and will be treated just like the rest of your pension. We might have to make a change to your normal pension as part of this process, but only to make sure that the overall value of your pension does not go down. We will contact you with more about this in the next [time period].
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Checking GMP can take a few years
Checking GMP for all affected members of a scheme involves a great deal of work. That work includes running through the scheme’s historical data back to 1990. It also involves working with specialist advisers and the scheme’s administrator to recalculate benefits, and tracking down members who have left the scheme.
As a result, it can take a few years for a scheme to finish this exercise. Members in the same scheme might get communications about GMP at different times. Also, different pension schemes are at different stages of this process. So members in more than one scheme might hear from each scheme at different times.
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Different pension schemes are checking GMP at different times
We have started the process of checking GMP in our scheme. Most other schemes want to start and complete the process as soon as possible. However, there is no deadline for pension schemes to check GMP and update pensions.
If you’re part of another pension scheme that needs to run this exercise, it is up to that scheme’s trustees to decide the best time to do it. They might decide to wait and check GMP at a time when there are other checks going on. Or they might decide to wait until other checks have been completed before they check GMP. They will contact you if you are affected.
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Only pension schemes that contracted out of the Additional State Pension (or SERPS) are affected
GMP was only built up by members of pension schemes that chose to contract out of the Additional State Pension (also known as the State Earnings Related Pension Scheme or SERPS).
If you’re a member of another pension scheme from the same period that chose not to contract out, you won’t have GMP as part of that pension.
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Only GMP built up between 1990 and 1997 is affected
It took a long time for the rules on GMP to change
In the past, women got their State Pension earlier than men. Workplace pension schemes would often reflect this by setting women’s retirement dates at around 60, and men’s at around 65.
From 17 May 1990, pension schemes legally had to calculate workplace pensions the same way for men and women. However, this didn’t apply to GMP.
In 2018 the High Court ruled that GMP should have been included in the 1990 changes. This is why these GMP checks are only happening now, and why they only apply to people who built up GMP after 17 May 1990.
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Explainer animation
A picture, or in this case an animation, is worth a thousand words. To help explain GMPe to members we’ve used a supermarket trolley, along with some groovy 1970s supermarket music. Sounds weird, but it works. Take a look!
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Mark Smith, Head of Communications, BA Pensions
We were all going through the process of working out how best to communicate GMP equalisation so we thought why not collaborate? We’ve done that, but we also want this to be of benefit to all schemes.
FAQs
Why is the group making these free to use?
The schemes that collaborated on the project had a common problem to solve – how to communicate GMPe effectively. But this is true of all schemes, so we thought we would share with the industry to help schemes of all shapes and sizes with what is an industry-wide challenge. In doing so, we hope to drive consistency in communication across the industry.
Download GMPeasy Toolkit
Are these really free to use?
Yes, this breaks the rule that nothing in life is free! We only ask that you register to download the communications toolkit and animation so we have an idea of take up.
Download GMPeasy Toolkit
How do I download them?
It’s easy peasy. Just enter your details here and you’ll then be able to download the communications.
Download GMPeasy Toolkit
What if I want to make changes to the script?
The communications toolkit contains core messaging that, we hope, will be useful to all schemes. But schemes will be approaching GMPe in different ways and have different scheme rules, so we expect that schemes will want to amend the communications to suit their needs. View the comms toolkit as a ‘starter for ten’.
Download GMPeasy Toolkit
What if I want to make changes to the animation?
That’s more tricky. The animation was produced by Quietroom so we’d suggest you contact them at hello@quietroom.co.uk if you want to talk about creating a bespoke animation, but that won’t be free.
Download GMPeasy Toolkit
What if I have feedback?
Please let us know – the good, the bad, but hopefully not the ugly. Email us at gmpeasy@brightwellpensions.com.
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Will the group look at collaborating on any other initiatives?
We certainly hope so. Many heads is better than one and it’s been a fantastic collaboration. There are a number of communications challenges that are common to all schemes, so watch this space.
Download GMPeasy Toolkit
Have the comms had legal sign off?
Our aim was to make the communications as simple and easy to understand as possible and although they have been subject to legal input, we do ask that you make sure the material is suitable and correct for your scheme as we can’t assume any liability for any inaccuracies or omissions. To be on the safe side, we suggest schemes should consider getting their own legal review.
Download GMPeasy Toolkit
Have the comms been tested on real people?
They have. We tested the paragraphs and animation script on real members of DB schemes, who knew nothing about GMP. We learned from what they told us about our early drafts, and made changes to take their comments into account to make sure the communications were easy peasy to understand.
Download GMPeasy Toolkit
Download GMPeasy resources
Just enter your details below and we'll send GMPeasy's member comms resources straight to your inbox, including the embed code for the explainer animation.
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Download GMPeasy resources
Just enter your details below and we'll send GMPeasy's member comms resources straight to your inbox, including the embed code for the explainer animation.
This website is powered by Emblaze
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