The Government recently published their response to the consultation on the proposed methodology for equalising Guaranteed Minimum Pensions (GMPs)[1]. For further information on GMPs and the proposed methodology, please see our December 2016 blog: GMP equalisation: is the end in sight? Patricia Bailey explores the details.

How did the industry respond?

The general consensus is that the new proposed method is an improvement on the 2012 proposal and would be simpler and cheaper administratively to implement. However, unsurprisingly a number of issues were raised during the consultation which the Government is proposing to take back and discuss with the working group. Some of the issues raised include:

  • How schemes should deal with GMPs that have been bought out or transferred. Does the responsibility fall on the transferring scheme, receiving scheme or annuity provider?
  • What should be done about backdating payments and whether interest should be added? Also, is it necessary to backdate payments more than 6 years?
  • What happens where members have made plans based on benefit quotes or members could not be traced?
  • Could the proposed change to notify members before and after the conversion be dealt with in a single notice?
  • The need to consider tax implications e.g. any impact on the lifetime allowance.
  • The position where benefits have already been secured.
  • Possible other methodologies.

It was also suggested that the Government holds fire on taking any further action until the outcome of the Lloyds Trade Union case[2] (which is expected to be heard this year) and the impact of the UK’s exit from the EU on pensions and equality legislation is known.

How did the Government respond?

At this stage there are still many unanswered questions. The Government has made it clear that the proposed methodology is a suggested approach and not a legal requirement, and that other methods that were previously used may be acceptable. It is not prepared to state that the new methodology ‘is a definitive statement of how equalisation should be effected’ nor is it prepared ‘to provide a statutory safe harbour in respect of the proposed methodology’. This is likely to provide little incentive for schemes to take action before they consider they are required to do so.

The Government’s position remains that whilst the UK is still a full member of the EU, the obligations of the EU apply including the principle of equal pay (which includes occupational pension benefits). Where trustees are satisfied that their scheme is providing equal benefits, they do not need to take any action.

What’s next?

There is no specific timetable for when further guidance and potentially amending legislation will be published. In view of this, and a pending court case on the issue, it is highly unlikely that schemes will be taking action to equalise GMPs in the immediate future unless they have to e.g. as a result of entering the Pension Protection Fund or buying out benefits. For the time being at least, the waiting game continues.

The original consultation can be viewed here.

For further information, please contact:

Michael Collins, partner, Pensions

T: 0121 234 0236 

E: Michael.Collins@gateleyplc.com

[1] The Occupational Pension Schemes and Social Security (Schemes that were Contracted-out and Graduated Retirement Benefit) (Miscellaneous Amendments) Regulations 2017 – Government response –  Occupational pensions legislation reviews. The proposed methodology for equalising pensions for the effect of GMPs – March 2017

[2] Lloyds Trade Union v Lloyds Bank Pension Scheme and other.


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.