The GMP rules have been around for a long time. The Paymaster newsletter has talked about it for at least the last 10 years so it should come as no surprise.
The Forces Pension Society try to explain it as well:
What is a GMP?
A GMP is the minimum pension which an occupational scheme such as the Armed Forces Pension Scheme (AFPS) must provide as one of the conditions of contracting out. The AFPS is contracted out of the Second State pension, previously known as State Earnings Related Pension Scheme (SERPS). If you or your deceased spouse were employed in the Services and a member of AFPS 75 between 6 April 1978 and 5 April 1997 you will have earned a GMP. GMP is not a separate benefit paid in addition to your AFPS pension but the pension we pay you must equal or exceed the GMP.
HM Revenue and Customs work out the level of your GMP. Your GMP comes into force normally when you ask for your State pension to be paid to you. (There are circumstances when the GMP comes into force at a later date but the effect on your AFPS pension is the same).
What is pensions increase?
The Pensions (Increase) Act 1971 governs the cost of living increases that apply to public service pensions. Xafinity Paymaster is the organisation that pays your pension under contract to the SPVA, who are the AFPS Administrators. Xafinity Paymaster increases your pension each year to reflect rises in the cost of living as centrally directed. The annual increase in public service pension is the same percentage as that applied to additional State retirement pensions and other Social Security benefits.
How is the pensions increase applied to my GMP?
Xafinity Paymaster applies the pension increase to the whole of your AFPS pension, including the GMP element, until your GMP comes into force. At this point your AFPS pension is paid as follows:- For service up to 5 April 1988 - The Government will pay the pensions increase relating to the GMP you earned up to this date with your State pension.
- for service between 6 April 1988 and 5 April 1997 - Xafinity Paymaster will pay increases on the GMP you earned in this period up to 3%. In years when the increase is more than 3% the Government will pay the balance with your State pension.
What effect does this have on the pension you pay me?
When your GMP comes into force the National Insurance Contribution Office (NICO) tell Xafinity Paymaster the amount of your GMP. Paymaster then adjust their records to reflect the fact that the Government now pays some of the annual pensions increase on the GMP element of your Armed Forces pension with your State pension. The overall increase in your pension will however be the same.
I haven't reached 65 yet but my teacher wife has a COD/GMP of £38.65 per week on her State Pension.
From reading the various documents I think the shock comes when, having been paid your RAF pension for some years, the State Pension kicks in and the
increase in the GMP bit of all those years of RAF Pension payments gets revalued because it will be paid as part of your State Pension.
Not exactly straighforward!