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PASA Guidance on data for GMP equalisation 


July 15, 2020

PASA's latest guidance addresses how trustees should prepare their scheme data for GMP equalisation.

The cross industry GMP equalisation working group, chaired by the Pensions Administration Standards Association (PASA), has issued its latest GMP equalisation guidance, focusing on the data required for a successful equalisation exercise. The guidance is intended to help trustees, advisers and administrators take the steps necessary to get their data ready for GMP equalisation. While the guidance does not have a legal standing, it provides a helpful steer as to what might be considered appropriate practice and provides useful analysis that illustrates how trustees can take forward their data for GMP equalisation purposes.

The data required for a GMP equalisation project will often go beyond that required for the on-going administration of a scheme. While sufficient data will not always be readily available, or at least not without significant effort, the guidance notes that approximations and assumptions should only be made where necessary. Trustees will need to consider the impact of any missing data and weigh up the costs of obtaining it against the impact and risk of not doing so and they may need to seek legal advice.

The working group suggests several approaches that could be used (“Calculation Solutions”) and key questions trustees may wish to address when choosing an appropriate solution or (possibly) different solutions for different groups of members. These include whether the method is likely to provide reasonable GMP equalisation adjustments for a scheme’s benefits structure, how it fits with past administration practices, whether it avoids any bias in its application, as well as ensuring that costs are controlled to the level necessary to make reasonable adjustments.

The guidance encourages trustees to sit down with their advisers and their sponsor at an early stage to plan the project. The planning needs to take into account the data available and the impact of making assumptions or approximations. Such discussions will help to narrow down the approach to GMP equalisation which, in turn, will help to identify the data required for a successful project.

A key decision for trustees at this stage will be to map out who will do which parts of the work, for example the data analysis and construction of the pension tranches required for equalisation could be completed by the administrator, actuary or another party, although in practice it is likely to be a full team effort. As many schemes will also be completing similar exercises, an important consideration is likely to be the availability of suitable resources.

The guidance provides a comprehensive description of the various practical approaches to getting the data fit for a GMP equalisation exercise project, including specifying which data is required for each approach. This framework will be helpful, although at every stage trustees will need to weigh up the potential impact on members’ benefits, since GMP equalisation adjustments can be very sensitive to any assumptions made. Often trustees will need to decide where to strike this balance between accuracy and pragmatism.

This publication marks a further step on the GMP equalisation journey and will help move projects forward.

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