delete The Guaranteed Minimum Pensions Increase Order 2022
This Order sets the percentage increase for Guaranteed Minimum Pensions (GMPs) attributable to earnings factors at 3% for the relevant tax years, as required under section 109(2) and (3) of the Pension Schemes Act 1993. It extends to England, Wales and Scotland and came into force on 6th April 2022.
Mandated GMP indexation creates unnecessary labor market distortions by artificially elevating the total compensation cost of employment, particularly affecting lower-wage workers where GMPs represent a higher proportion of total remuneration. While the 3% figure tracks inflation, the underlying requirement forces employers to bear defined-benefit pension obligations that distort hiring decisions and reduce workforce flexibility. The mechanism rewards incumbents over new entrants and compounds administrative complexity. The policy goal of protecting retirees from inflation could be achieved through private alternatives (inflation-linked annuities, targeted means-tested transfers) without imposing mandatory defined-benefit costs on all employers.