Schemes that thought they might be unaffected by a recent court ruling could still owe savers more than £500 each in top-up payments on their DB transfers, analysis has found.
Analysis by XPS Pensions, published this week (December 8), found savers could be owed up to £32,000 by pension schemes under GMP equalisation, with over half owing £10,000.
As the group carried out more GMP equalisation calculations, it also found that all schemes so far owe at least one individual a minimum of £500.
Vicky Mullins, GMP equalisation lead at XPS Pensions, said: “Although the largest payments are eye catching, it is also interesting that even schemes that consider themselves largely unaffected owe some pensioners over £500 each, cash which would be most welcome to many.”
This comes after the High Court ruled last month (November 20) that trustees committed a breach of duty if they did not equalise the member’s guaranteed minimum pension benefits at the time of calculating the cash equivalent transfer value.
Therefore, trustees of DB schemes will have to revisit transfers made in the past 30 years for individuals with contracted-out benefits, and provide a top-up if necessary.
According to XPS, GMP equalisation affects almost every DB scheme and is expected to impact more than 5m members.
Ms Mullins said while the recent judgment does not change what schemes need to do to correct members’ benefits, it does add “a whole new set of members that need consideration”.
She added: “Finding and communicating with these members may be difficult. Pensions schemes will need a process to find, verify and get payments to each of them.
“As schemes review their business plans for 2021, it is vital to ensure getting GMP equalisation done is firmly on the agenda to get these back payments paid to members promptly.”
Meanwhile, advisers have been urged to proactively check whether their clients are affected, due to the large amount of work required.
David Brooks, technical director at Broadstone, previously told FTAdviser: “If an adviser has a client and they know they’ve made a transfer from a contracted-out defined benefit pension scheme then I would expect them to proactively contact the scheme as there is a fair chance there would be some additional money.
“The scheme may struggle to work it out, and it may take time to do so.
“However, in the long run it may well be assisting the scheme in the cost of tracing members who transferred out many, many years ago.”
amy.austin@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
