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 of the above pension elements increase in payment, please click here to see an example increase calculation.
Your Scheme pension is made up of different elements, which increase in different ways. Details of how your pension is made up can be found on your payslip. The different elements of your pension are:
Guaranteed Pensions, which means the pension earned for service in the industry before the date of privatisation in 1994, plus cost of living increases awarded since then. These benefits are covered by the Government Guarantee and are reviewed each year based on the change in the Retail Prices Index (RPI) in the 12 months to the previous June. If you receive a GMP element it will be included in the guaranteed figure on your payslip.
Bonus elements, which were awarded from previous valuation surpluses. No increases are added to these bonus elements. You may see the following bonus elements on your payslip:
Reducing Bonuses - these are the bonuses granted to members before 2012 which will continue to reduce until they are overtaken by increases on the guaranteed pension.
Protected Bonus - this bonus is applicable to some members who are entitled to the Value for Money Guarantee. This bonus is protected and cannot reduce.
Bonus 2012 - the bonus awarded in autumn 2012.
Bonus 2014 - the bonus awarded in April 2014.
Bonus 2015 - the total bonus awarded in 2015 and 2016 to offset the decrease in the Reducing Bonus in those years.
Guaranteed Minimum Pension (GMP) - if your membership (or your late husband or wife’s membership) ended after 5 April 1978 this element will be included in the guaranteed figure on your payslip. Members who receive a guaranteed pension that consists of GMP-only elements do not receive bonuses.