Guaranteed Minimum Pensions
Whilst you were a contributing member of the MNOPF Defined Benefit Section, you may have been contracted-out of the State Earnings Related Pension Scheme (“SERPS”) for some, or all, of your contributory service. If this was the case, you will have paid National Insurance (“NI”) contributions at a lower rate than for somebody who was not contracted-out. In return for this, the MNOPF must provide a pension at least equal in value to a prescribed minimum amount called the Guaranteed Minimum Pension (“GMP”). In practice, MNOPF pensions are more generous than these minimum amounts, so your GMP forms part of your overall MNOPF pension.
In 2016 SERPS ceased to exist and no GMPs have accrued since this time. The calculation of GMPs is very complex and relies on National Insurance contribution data submitted historically to HMRC and to the MNOPF. Your MNOPF record includes month by month data showing the contribution paid by you and the corresponding NI contribution; this information was provided every month by your employer while you were an active member of the MNOPF. Independently of this your employer should have also remitted your NI contribution information to HMRC.
Since 2016, HMRC and the pensions industry have been working to ensure that the GMP values recorded and calculated by pension schemes and at HMRC are the same. This substantial exercise is known as GMP reconciliation and HMRC may contact members independently to notify them of the GMP value it has recorded, and the name of the pension scheme which has the responsibility to pay it.
The MNOPF has undertaken a substantial project to match and reconcile its members’ GMP records with HMRC. In most cases this has now been completed. Where there is any discrepancy, and where it holds complete NI records for members, the MNOPF will uphold the GMP values that have been calculated within the scheme. In a few cases this may mean that a GMP value attributed to MNOPF by HMRC is different to that calculated by the MNOPF, however the MNOPF will not make any changes to the GMP values it has calculated unless evidence is submitted indicating that its own data records are inaccurate or incomplete.
In the few cases where a discrepancy is found to exist, the MNOPF will contact the member concerned directly.
In a recent court case involving Lloyds Bank and its pension scheme, a judgement was reached that GMPs must be equalised in respect of males and females. This follows legislation passed some time ago requiring pension schemes to equalise their main scheme benefits from 17 May 1990, which has been in place for MNOPF members since the requirement became law. However, in common with most other defined benefit pension schemes, the MNOPF has not equalised GMPs due to a lack of guiding legislation and the extreme complexity of any calculations required.
Although the Lloyds case will be appealed and the methods by which pension schemes may equalise GMPs may still change, the requirement to equalise will endure. The MNOPF is committed to equalising GMPs, and expects this to commence in 2021 / 2022. In the meantime, quotations and benefit claims will continue to be provided to members on the current basis and any members who could be affected by GMP equalisation will be notified that a subsequent adjustment to their benefits may be made once the Trustee has agreed the method to undertake the equalisation and once the outcome of any appeal to the Lloyds judgement is known.