The DWP has issued a warning for state pensioners after the New State Pension ended government paying living cost increases on your GMP
Some State Pensioners have been issued a warning after the Department for Work and Pensions (DWP) made a change which could cause “notable loss”.
The DWP has stopped paying cost of living increases to people on the new State Pension. A GMP – Guaranteed Minimum Pension – represents a minimum pension that a workplace pension scheme typically delivers.
It only affects people who were contracted out of the Additional State Pension between 6 April 1978 and 5 April 1997. The GMP you receive from a workplace pension scheme is generally equivalent to, or exceeds, the Additional State Pension you would have received had you not been contracted out , reports Birmingham Live.
However, the DWP says: “Each year pension schemes have to increase the amount of GMP built up from April 1988 to April 1997 in line with living costs, this is capped at 3%. This is called ‘indexation’. Pension schemes did not have to provide indexation to GMPs built up between April 1978 and April 1988.”
The weekly loss is small for the first year but can build up over time (Image: Getty)
“To stop people with GMPs losing out they could be paid increases to cover living costs through the Additional State Pension. It only applied to people reaching State Pension age before 6 April 2016.
“The new State Pension started on 6 April 2016. If you reach your State Pension age on or after this date you will get the new State Pension.
“You will not get the Additional State Pension from the government which would have included your indexation. These increases ended when the new State Pension started.”
The DWP has highlighted a scenario where people could be adversely impacted. For instance, if you received a weekly GMP of £35 in 2015 and inflation was at 2%, then the following year your Additional State Pension would only increase by a maximum of 70 pence per week.
Furthermore, if you reach State Pension age on or after 6 April 2016, you won’t be eligible for Additional State Pension or these increments.
The DWP warns: “The weekly loss is small for the first year but can build up over time. Somebody with a large GMP reaching State Pension age from April 2016 to March 2017 could have a notable loss over their whole retirement.”
