Which statement about GMP is true?

• A. It guarantees a pension for life.
• B. It is a tax relief instrument.
• C. It historically promised to some groups and affects benefit calculations, transfer decisions, and guarantees.
• D. It is a savings product you can invest.

Answer: (C)

GMP, or Guaranteed Minimum Pension, comes from defined benefit schemes that contracted out of the State Earnings-Related Pension Scheme between 1978 and 1997. It was created to guarantee a minimum pension for the part of benefits earned while those schemes were contracted out. Because GMP is a separate component of the overall DB entitlement, it has to be treated differently in calculations, revaluations, and transfer valuations. That means it can influence how much you receive from the GMP portion, how transfers are valued when moving to another scheme, and the guarantee aspect tied to that contracted-out entitlement. It’s not a universal lifetime guarantee for all pension income, nor is it a general savings product or a tax-relief vehicle. So the statement that GMP historically promised to some groups and affects benefit calculations, transfer decisions, and guarantees best reflects its nature and implications.