PENSION INCREASES
Your pension is increased on 1 April each year in line with inflation as measured by the increase in the Retail Prices Index (RPI) over the 12 months to the previous September, up to a maximum of 5%.
If the increase in RPI is greater than 5%, any increase in excess of 5% is payable solely at the discretion of National Grid.
If you have not yet reached age 65 for men, and 60 for women, the increase is applied to the whole of your pension. Once you get past these ages, things are a little more complicated!
GMP increases
If you were a member before 6 April 1997, then part of your pension will be made up of the Guaranteed Minimum Pension (GMP). GMP is the name given to the minimum level of pension income that workplace pension schemes had to provide to employees who were ‘contracted out’ of the State Second Pension (between April 1978 and April 1997, when GMP stopped being accrued).
It is made up of two elements built up before and after 6 April 1988. Legislation sets out the increases to be applied to these benefits. The GMP accrued in the first period does not increase; and increases for the second period are limited to 3% per year and are based on the Consumer Prices Index (CPI) over the 12 months to the previous September.
Non-GMP increases
Increases to your pension in excess of the GMP will be made in line with inflation as measured by the increase in the Retail Prices Index (RPI).
If your pension has not been in payment for a full year, you will receive a proportional increase.
Railpen send out a statement each April giving you the breakdown of how your pension increase has been calculated.
Guaranteed Minimum Pension (GMP) Equalisation
GMP equalisation is the name given to the process of reviewing the benefits people built up when they were contracted out between 17 May 1990 and 6 April 1997, and correcting these benefits where necessary, so that men and women are treated equally.
In October 2018, a court case in relation to GMPs and gender equality was determined, which has implications for many defined benefit schemes across the UK, including the Group.
Your pension is made up of different parts, based on when it was accrued. If you were building up pension between 6 April 1978 and 5 April 1997, one of these parts is GMP. This is the minimum level of pension income a workplace pension scheme has to provide to employees who were contracted out of the State Second pension / State Earnings Related Pension Scheme.
The Group Trustee has been working with its advisers to consider how to approach the equalisation exercise. If your pension needs adjustment, we expect any top-up to be relatively small for most pensioners. If you’re affected, we’ll write to you with more information in summer 2023.
The Group will also need to review GMPs for members who have not yet started to receive their pension (‘contributing’ or ‘deferred’ members). This will follow in due course.