Defined Benefit  

Industry group to give GMP equalisation advice

Industry group to give GMP equalisation advice

A new industry group will provide advice on the equalisation of guaranteed minimum pensions (GMPs) after a landmark ruling handed down in October.

The Pensions Administration Standards Association (PASA) brought together representatives from across the industry to help scheme with issues arising from the ruling.

In a decision which could have widespread implications for hundreds of thousands of pensioners, the High Court ruled trustees must equalise benefits between women and men who have GMPs because of contracted out benefits.

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The ruling has already prompted some schemes to put transfers on hold as they are concerned they may be found to have deprived members of the potential uplift from equalisation if if they carry out transfers based on existing valuations.

Final salary scheme members who contracted out are set to receive millions of pounds in back payments following the landmark ruling.

The new industry group will develop and promote best practice on issues such as how to address missing data, dealing with transfer requests and rectifying underpayments.

The group will be chaired by Geraldine Brassett, director at PASA, who said: "We recognise the value that best practice guidance on GMP equalisation will provide and are pleased to lead this cross industry initiative.  

"GMP equalisation projects are likely to be complex so it is important that advisers, administrators, trustees and employers work collaboratively to ensure cost-effective delivery and clarity for scheme members impacted."

David Fairs, executive director of regulatory policy, analysis and advice at The Pensions Regulator, added: "Delivering GMP equalisation will be challenging and we welcome this initiative to bring clarity to the market.

"It will take some time to work through all the issues. Establishing best practice will help industry do this as efficiently as possible, and minimise disruption to routine scheme business."

The court case in question was that of Lloyds Banking Group Pension Trustees Limited vs Lloyds Bank plc (and others).

The court ruled pensions provided to members who had contracted-out of their scheme must be recalculated to ensure payments reflect the equalisation of normal retirement ages in the 1990s.

The ruling effectively meant thousands of defined benefit schemes would have to amend their scheme rules and equalise GMPs between men and women.

But the court did not set a definitive method for equalisation, noting that a number of methods are available for schemes.

Sir Steve Webb, director of policy at Royal London and former pensions minister, welcomed the initiative but cautioned more needed to be done.

He said: "The recent Lloyds Bank ruling on GMPs has huge implications for employers, pension schemes and those who administer them and those who advise them.  

"It is welcome to see industry experts coming together to pool their knowledge and ideas about how to tackle this issue.

"But government and regulators cannot sit back and rely on the good will of industry. They need to be issuing clear guidance as a matter of urgency about what schemes should be doing, including the potential tax implications of equalising for the effect of GMPs."