Pension Increase and GMP

Pensions increase

Pensions are increased annually from April each year, in line with the cost of living. Pensions increase is determined by the HM Treasury and approved by Parliament then published in a Government order. It is usually based on the annual increase in the Consumer Price Index (CPI) to the previous September.

The annual increase in CPI to September 2023 was 6.7%.

HM Treasury have confirmed 6.7% is the pensions increase that will apply to pensions in payment from April 2024.

The increase occurs on the first Monday after the start of the tax year on 6 April. this means that your April pension will be paid partly at the old rate and partly at the increased rate. 

Please see the Pension Increase Flowchart to review what pension increase you are likely to receive.

The Pension increase indicator provides an indication of whether you a eligible for a pension increase:

Pension increase Indicator

Guaranteed minimum pensions

What is GMP?

Guaranteed Minimum Pension (GMP) is a type of protection that you may have included in your LGPS pension.

You may have a GMP if:

  • you paid into the LGPS between 6 April 1978 and 5 April 1997 and/or
  • you transferred in pension rights which included a GMP from another pension scheme. 

Why is it important?

The GMP is the minimum amount of pension that you must be paid in retirement for pension built up between 6 April 1978 and 5 April 1997.

If you have a GMP some of your pension increase will be paid with your LGPS pension and some will be included with your State Pension. You will still receive the full increase.

Why was GMP introduced?

Before 1 April 2016, the State Pension had two tiers:

  • the basic State Pension and
  • the State Second Pension (S2P) previously known as State Earnings Related Pension (SERPS).

Occupational pension schemes could 'contact-out' of S2P. The LGPS, in common with all public service pension schemes contracted out of S2P. This meant that:

  • LGPS members did not contribute to S2P and therefore paid a lower rate of National Insurance contributions.
  • The LGPS had to ensure that the pension paid to a member was at least as much as they would have received under S2P. This minimum level for pension was known as the GMP.

The GMP is not a separate pension. It is the minimum amount that a member's LGPS pension must reach. Usually, your LGPS pension is more than your GMP and the GMP is included in the LGPS pension.

How does GMP affect pension increase?

Every April, a pension increase is applied to your pension. Currently this increase is related to the annual increase in the Consumer Price Index to the previous September.

Pension started before State Pension age:

If you started receiving your pension after GMP age but before State Pension age, then all of the pension increase will be included in your LGPS pension payments.

Pension started on/after State Pension age:

Once you reach State Pension age the responsibility for paying increases on the GMP elements of your pension may be shared between the LGPS and the government. The responsible government department is the Department of Work and Pensions (DWP).

If you reach State Pension age after 5 April 2016, then all of the pension increase will be included in your LGPS pension payments.

If you reach State Pension age before 6 April 2016 then the following table shows what increase is paid on the different parts of your pension and who is responsible for it:

Part of the pension Pension increase paid on this part Where paid Who pays it
Basic LGPS pension, less pre and post 1988 GMP Full increase With LGPS pension Your LGPS pension fund
Pre 1988 GMP Full increase With State Pension DWP
Post 1988 GMP 3% (or full increase if this is lower than 3%)

Any remaining increase over the 3%

With LGPS pension

With State Pension

Your LGPS pension fund

DWP

In other words, the DWP will pay:

  • All the pension increase on your Pre 1988 GMP
  • 3% of the increase on your Post 1988 GMP (or the full increase if this is lower)

and the rest of your increase is paid with your LGPS pension.

Note that: GMP is split into:

  • Pre 1988 - for the period 6 April 1978 to 5 April 1988 and
  • Post 1988 - for the period 6 April 1988 to 5 April 1997

because these two elements must be paid in different ways.

Example

You retired in April 2023 with an LGPS pension of £4,000 per year.

Your GMP was £1,000 made up of £300 for pre 1988 GMP and £700 for post 1988. This GMP is paid as part of your LGPS pension, so your basic LGPS pension without GMP is £3,000 per year.

The pension increase at April 2024 was 6.7%. It would be paid like this:

Part of the pension Pension increase paid on this part Where paid Who pays it
Basic LGPS pension, less pre and post 1988 GMP
= £3,000 (i.e. £4,000 - £1,000)
Full increase
6.7% of £3,000 = £201
With LGPS pension Your LGPS pension fund
Pre 1988 GMP Full increase
6.7% of £300 = £20.10
With State Pension DWP
Post 1988 GMP 3% (or full increase if this is lower than 3%)
3% of £700 = £21.00

Any remaining increase over the 3%
3.7% of £700 = £25.90

With LGPS pension


With State Pension

Your LGPS pension fund


DWP

Total increase on pension = £4,000 x 6.7% = £268

But this is paid by:

LGPS = £201 + £21 = £222
DWP = £20.10 + £25.90 = £46
Total = £268

Pensions increase and a new pension

The first increase that you will receive in the April after your pension starts will be a proportion of the full increase due, based on the number of months you have been retired.

The current annual increases are outlined below:

Date pension first payable Increase
23/04/2023 and before 6.7%
24/04/2023 to 23/05/2023 6.14%
24/05/2023 to 23/06/2023 5.58%
24/06/2023 to 23/07/2023 5.03%
24/07/2023 to 23/08/2023 4.47%
24/08/2023 to 23/09/2023 3.91%
24/09/2023 to 23/10/2023 3.35%
24/10/2023 to 23/11/2023 2.79%
24/11/2023 to 23/12/2023 2.23%
24/12/2023 to 23/01/2024 1.68%
24/01/2024 to 23/02/2024 1.12%
24/02/2024 to 23/03/2024 0.56%
From 26/03/2024 nil

If you are under 55, your pension will not be increased until your 55th birthday, unless your retirement was due to ill health or you are receiving a dependant's pension.