Guaranteed minimum pension meaning

In this issue: Automatic enrolment Investment Taxation Contracting-out Public sector pensions Daily and weekly news alerts Dates for your diary Trackers Automatic enrolment DWP publishes review of earnings trigger and qualifying earnings band for 2025/26 The Department for Work and Pensions (DWP) has released a review assessing the automatic enrolment (AE) thresholds—namely the earnings trigger and the qualifying earnings band—for the 2024 to 2025 financial year. In a written statement, the Minister for Pensions, Torsten Bell, emphasised that this year’s review primarily seeks to preserve the stability of automatic enrolment for both employers and individuals. The government also aimed to keep its framework enabling individuals to build pension savings while remaining affordable for employers and taxpayers. The review concludes that every AE threshold for 2025/26 will stay at the 2024/25 levels. The earnings trigger for automatic enrolment sets the point at which an eligible worker is put into a workplace pension...

Original news Mrs R (CAS-13126-Z0N2)—3 December 2025 Summary The Deputy Pensions Ombudsman has found in favour of a complaint concerning a disagreement about whether an alleged transferring or receiving scheme remained liable to deliver a member’s accrued benefits. The Deputy Pensions Ombudsman concluded that the absence of proof—no transfer application or discharge—substantiating any transfer indicated that no transfer actually occurred, and that responsibility therefore stayed with the original scheme. This decision demonstrates the stance the Pensions Ombudsman will adopt when resolving factual disputes. What were the facts? Mrs R was a deferred member of the HSBC UK Bank Pension Scheme (the Scheme). She exited the Scheme in 1990 and was sent transfer paperwork stating a transfer value of £5,287. The Scheme’s ledger subsequently noted that her benefits, including guaranteed minimum pension (GMP), were transferred in 1992 to a Liberty Life Personal Retirement Plan (the Plan)...

Original news Mr T (CAS-35991-Q6G0)—6 December 2023 Summary The PO has partly upheld a complaint concerning the information supplied with a pension increase exchange offer. The employer was not liable for negligent misstatement because the material—although not fully specific and not distinguishing between increases on pre- and post-April 1988 Guaranteed Minimum Pension (GMP)—was still accurate. By contrast, the adviser on the offer committed maladministration by wrongly indicating that all of the member’s GMP would increase. The PO’s decision underlines how vital it is to issue precise, reliable information and advice for a pension increase exchange (PIE). What were the facts? Mr T was a member of the Electronic Data Systems 1994 Scheme (the Scheme). The Scheme’s employer introduced a PIE offer. Mr T was provided with information about the PIE offer...

This Practice Note concentrates on the matters that applied prior to 6 April 2016—the date on which salary-related contracting-out (often called DB contracting-out) was brought to an end—when buying out these contracted-out salary-related (COSR) entitlements: guaranteed minimum pensions (GMPs)—the benefits built up by COSR scheme members as a result of contracting out between 6 April 1978 and 5 April 1997 Section 9(2B) rights (also referred to as post-1997 COSR rights)—the benefits accrued by COSR scheme members as a result of contracting out between 6 April 1997 and 5 April 2016 The legislative requirements that applied differed according to whether the relevant contracted-out rights were GMPs or Section 9(2B) rights. For guidance on the buy-out considerations from 6 April 2016 for Section 9(2B) rights and GMPs, see Practice Note: Buying out Section 9(2B) rights and GMPs from 6 April 2016. For general issues relating to buy-outs, see Practice Note: De-risking—pension buy-outs and buy-ins. For information on the ending of DB contracting-out on 6 April...

The concept Historically, under contracted-out salary-related (COSR) schemes, a deferred member’s guaranteed minimum pension (GMP) could be uprated with no rise in the overall deferred pension. This was achieved by cutting the element above the GMP so that the total stayed unchanged, in effect using the excess to fund the GMP revaluation. That practice is termed ‘franking’; ‘anti-franking’ describes the statutory bar on it, which requires a floor of benefit—the ‘relevant aggregate’—for members, and for their spouses and civil partners, at GMP age. Consequently, schemes must preserve the pension above GMP and raise the member’s total pension, rather than trimming the excess. At GMP age, schemes must meet the relevant aggregate for members, spouses and civil partners by safeguarding the excess and increasing totals...

FORTHCOMING CHANGE : The Pension Schemes Bill, anticipated to secure Royal Assent in 2026, contains measures that confer on the Pensions Ombudsman authority equivalent to that of a competent court for matters concerning the recoupment of pension overpayments. This reform removes the necessity for trustees to seek County Court involvement in such cases, thereby cutting legal costs, easing administrative burdens and promoting a swifter, more effective recovery process for schemes and their members. For more detail, see LNB News 05/06/2025 42 and Pension Schemes Bill—tracker — Pensions Ombudsman and overpayments. THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL PENSION SCHEMES ONLY This Practice Note explores the extent to which accrued pension entitlements under registered occupational pension schemes may be surrendered or forfeited. The general rule against surrender—the inalienability rule Under section 91(1) of the Pensions Act 1995 (PA 1995), a member’s accrued benefit rights in a registered occupational pension scheme cannot be assigned, commuted, surrendered or charged, and no lien or set-off may be exercised over them....