DWP reveals lack of applications for GMP compensation

GMPs were created due to contracting out, which meant that defined benefit schemes could prevent their members tripling up on pension benefits by building up a basic state pension, state earnings-related pension scheme entitlement, and an occupational pension. In exchange for giving up Serps, both employees and employers paid less in national insurance contributions.

Schemes were not required to increase the GMP accrued between 1978 and 1987 in line with inflation. But benefits accrued between 1988 and 1997 were indexed, up to a maximum of 3 per cent a year.

The DWP was compelled to publish a factsheet following a Parliamentary and Health Service Ombudsman’s determination in 2019, which found that the department had failed to inform people about the adverse impacts on their state pension due to the decision to end the indexed GMP top-up when the new state pension was introduced in 2016.

However, as Pensions Expert reported in October 2020, the government was delayed in complying with the PHSO ruling to create this document, which should “explicitly tell people to check their circumstances” and “provide details to the public about how they can do this”.

The factsheet was finally published in August 2021. Work and Pensions Committee chair Stephen Timms wrote to the DWP in December raising a number of questions about the document, which he said the department should consider when it carried out its six-month review.

Timms asked what steps had been taken to promote the factsheet and how effective that promotion had been, what the response would be to low uptake, and how many people had contacted the DWP having read the factsheet.

He also asked whether the department has consulted the two members awarded compensation by the PHSO, whether the factsheet in fact met the requirements of the ombudsman’s determination, and whether it adequately explained to people what to do if they had been negatively impacted by the change to GMPs.

Separately, he asked whether members would in general be able to apply for the same compensation awarded to the two initial complainants, and how many people had applied for that compensation.

Responding to Timms’ letter, Peter Schofield, permanent secretary at the DWP, said on January 18 that the department would include each of the points raised by the committee in its six-month review of the factsheet, and would inform the committee of the outcome of that review.

On the question of whether members could apply for the same compensation awarded to the two members who complained to the PHSO, he wrote: “The factsheet explains the GMP policy change, provides examples of how people could be negatively affected by it, and also describes that — after other policy factors are taken into account — people do not necessarily lose out because of the GMP change.

“The factsheet concludes by asking people to write to the department if they would like advice about their own position.”

Schofield said that, as yet, no one had written to the DWP demanding compensation. Moreover, the department had only received four letters in total resulting from the factsheet.

Two were from members with public service pensions who were unaffected by the change, one was from a member who would not have had their GMP uprated under the old rules until their gross additional state pension had exceeded their GMP, and the fourth was from someone under the state pension age whose state pension would in fact be higher than under the old system.

“All four correspondents received a full account of how the GMP change and the other policy factors affected their state pension entitlement,” he concluded.