A lot of members contact us to ask us to explain how pension increases are applied each year. To help you better understand how all the different elements of your pension increase in payment, please click here to see an example increase calculation.
In Summary your Scheme pension is made up of different elements, which increase in different ways:
Your Guaranteed Pension element (excluding GMP – see below) increases towards the end of September each year based on the change in the RPI in the 12 months to the previous June.
Level bonus - this does not increase.
Reducing bonus - these are the bonuses from previous valuation surpluses which will continue but reduce over time.
Guaranteed Minimum Pension (GMP) - at age 60 for women and 65 for men your pension must be at least equal to your GMP element in respect of membership after 5 April 1978. For most members, the total Scheme pension is higher than the GMP but if it is not, the MPS would increase the pension so that it is equal to the GMP.
From age 60 for women and 65 for men, the following arrangements apply for increases to any GMP element:
If you reached State Pension Age before April 2016:
- The State is responsible for any increase on GMP arising from contributing service between April 1978 and April 1988. Any increase payable is added to your State Pension by the Benefits Agency when your State Pension increases. These increases are effective from 6 April each year.
- For GMP arising from contributing service after April 1988 the MPS will pay the increase in the Consumer Price Index (CPI), up to a maximum of 3%. These increases are effective from 6 April each year. In any year that CPI has increased by more than 3% the State will make up the increase to the CPI level.
If you reached State Pension Age after April 2016:
- The GMP arising from contributing service between April 1978 and April 1988 will not be increased by the MPS or the State.
- For GMP arising from contributing service after April 1988 the MPS will pay the increase in the Consumer Price Index (CPI), up to a maximum of 3%, effective from 6 April each year.
Further details of how your own pension is made up can be found on your payslips, which are available to view online via the secure member site. To log in or to register, please click on the "Member log in" icon at the top of the page. A more detailed breakdown can be found in your Pensions Increase letter.