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Survey Report

‘GMP equalisation’

Chapter three of 2019 Emerging Trends in DB Survey

Pension Board and Trustee Consulting|Pensions Corporate Consulting|Pensions Risk Solutions|Pensions Technology|Retirement

November 2019

In this chapter, we explore to what extent  'GMP equalisation' has impacted DB pension schemes.

On 26 October 2018 the High Court handed down its judgment in the Lloyds case relating to equalisation of member benefits for the gender effects of Guaranteed Minimum Pensions ('GMP equalisation'). This addressed a long-standing legal uncertainty and set a precedent for other UK schemes with GMPs.

GMPs replace part of the State Pension for people who were contracted out through DB schemes between 6 April 1978 and 5 April 1997 and form part of the occupational pension they receive. By law, GMPs are calculated differently for men and women, which means that the total benefit can also be different. Whether men or women are entitled to larger benefits can depend on the members' circumstances and the scheme design, and the answer can change as people get older. The High Court ruled that benefits accrued from 17 May 1990 must be equalised to counteract the effect of unequal GMPs.

Most respondents expect ‘GMP equalisation’ to take at least two years to do the bulk of ‘GMP equalisation’ (56% Trustee, 68% Corporate) and half of schemes expect to apply a time limit on back payments (with the vast majority of these expecting to apply a time limit of six years).

Although ‘GMP equalisation’ is one of the top issues facing schemes today and a major administrative burden, in nearly all cases the increase in pension payments to typical affected members benefit is expected to be very small (Figure 3). Nevertheless, we see a third of schemes reporting that some members will gain significant amounts (rising to over half in financial services). We have seen a number of cases where the difference that ‘GMP equalisation’ makes to the value of a member’s benefits (rather than the annual pension) is a four-figure sum.

Figure 3 Shows survey results for both trustees and corporates on their views about GMP equalisation. 
Figure 3: To what extent do you agree or disagree with the following statements about ‘GMP equalisation’?

Note: Percentages may not sum to 100% due to rounding

Interestingly, whilst the original Lloyds case related to complaints from female members our survey suggests for many schemes it may be that males are the primary beneficiaries of the resulting equalisation. Men are expected to be more likely to benefit in around half of schemes.
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2019 Emerging Trends in DB Survey PDF 5.4 MB
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