Government confirms GMP equalisation and consults on
legislative changes
You may have already read about the thorny question of GMP
equalisation. GMPs (or Guaranteed Minimum Pensions to give them
their full name) are the benefits which members of schemes that
were contracted out of the second State pension accrued up until 5
April 1997, when GMPs were abolished. As GMPs were based on the
State pension ages (which provide a different normal retirement age
for men and women), GMPs accrued at different rates, and are
payable from different ages, for men and women.
Ever since the comments made by Angela Eagle on 28 January 2010
(in which she stated that the Government believed that GMPs had to
be equalised), there has been significant uncertainty as to whether
schemes will be required by domestic law to equalise GMPs and what
process should be used to achieve this. Many ongoing schemes have
chosen to wait for the promised clarification from the Government
before taking any steps in relation to this issue. GMP equalisation
has given rise to more immediate challenges for schemes in the
process of winding-up.
The Government finally issued a consultation
document on Friday 20 January 2012, which confirmed that
schemes are under a legal obligation to equalise GMPs. The
consultation document provides a suggested methodology which
trustees can adopt to achieve this. The Government has said however
that this suggested approach is for guidance purposes only and is
not something which schemes will be required to follow. On this
basis, the promised clarification and "guidance" has fallen far
short of many in the pensions industry had hoped for. Based on the
consultation document, it still remains very much a decision for
each scheme as to how they equalise GMPs in practice.
What is clear however is that GMP equalisation is not an issue
which will go away and is therefore something which will have to be
addressed by all schemes which hold GMPs.
Please get in touch with your usual contact in the Blake
Lapthorn Pensions team if you would like us to advise further in
relation to the equalisation of GMPs in your scheme or if you have
any questions about it.
We will be discussing this issue at our next Trustee Forum,
which will be taking place on 14 March, commencing at 8.30 am
(refreshments and registration from 8.00 am). If you are a trustee
and want to come along to this forum - it is only for trustees and
we will aim to finish by about 10.30 am - please contact
Adrian Lamb, using the
contact details below or Lucy Weale on 023 8085 7086
or lucy.weale@bllaw.co.uk.
