Guaranteed Minimum Pension

When a final salary pension scheme has contracted out of the state scheme, the guaranteed minimum pension (GMP) relates to the earnings component of the state pension that you would have earned while in the employer's scheme, if you had not contracted-out.

One of the requirements of contracting-out was that the pension payable from the scheme had to be of a minimum level, known as the GMP.

When someone leaves a pension scheme, all or part of the pension earned to that time will be made up of the GMP. The GMP element must be increased for each complete tax year between the date of leaving the scheme and state pensionable age.

Last Updated: June 2007 © Moneyextra.com

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