The government has confirmed it will reduce the GMP fixed rate revaluation rate for early leavers from 3.5% to 3.25% per year.

In response to its consultation – published last year – the Department for Work and Pensions (DWP) said the new rate will apply to members where applicable from 6 April 2022.

Where a member of a formerly contracted-out pension scheme leaves the scheme before pensionable age – an ‘early leaver’ – the scheme must revalue its GMP to when it becomes payable at pensionable age.

The percentage it is revalued by is provided for in legislation and is reviewed every five years by the DWP.

The DWP received just two responses to its consultation, and said the lack of responses “is indicative of a general agreement that the proposed new rate of revaluation for the fixed rate revaluation for GMPs is appropriate”.

One respondent suggested the 3.25% per year rate was “too high”, on the grounds that a lower rate of fixed rate revaluation would be in the interests of members of money purchase schemes with GMPs that are subject to fixed rate revaluation.

However, the DWP yesterday (21 February) confirmed the current rate of 3.5% per year, which has been in place since 2017, would be adjusted to 3.25%.

The consultation also asked whether it should adopt a short- to medium-term view on inflation and real earnings growth when considering the appropriate rate of fixed rate revaluation. One respondent agreed with this approach while the other said it was not in their remit.

It also asked whether the DWP should continue to exclude the additional 0.5% per year premium which it used to apply to the rate of revaluation set for fixed rate revaluation for GMPs. Again, one respondent agreed with this while the other suggested it was not in their remit.

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