GMP to cost Compass Group 1-2% of liabilities; records £346m surplus

Written by Theo Andrew

The Compass Group is expecting guaranteed minimum pension (GMP) equalisation to cost between 1-2 per cent of liabilities after it recorded a surplus of £346m for its main defined benefit scheme.

According to its full-year results, the group achieved an £87m increase on the £259m surplus recorded in 2017, but is expecting the ruling to hit in the next financial year.

Compass Group said: “Initial estimates indicate that this obligation could be between 1-2 per cent of the gross liabilities of the group's UK defined benefit pension plan (£20m - £40m).

“The effects of the ruling will be recognised in the next financial year when the obligation to amend the plan's benefits has arisen.”

Last month, Mr Justice Morgan ruled that Lloyds must start the process of equalising the benefits in relation to the GMP, which could cost the bank up to £150m.

The ruling was delivered after a two-week trial in July, after three female members of Lloyds Banking Group’s final salary pension schemes claimed sex discrimination because their GMPs increased at a lower rate than male members.

According to its results, the rest of its defined benefit schemes reached a £224m deficit, a £7m reduction on the £231m recorded last year.

A number of large defined benefit schemes have already started assessing the impact of the GMP ruling.

Despite this, JLT Employee Benefits director, Charles Cowling, believes that it will be at least six months before schemes can fully calculate the impact of the ruling.

He said: “Detailed calculations will not be possible before year end, it will probably take at least six months to sort out detailed calculations, maybe longer if there are further legal challenges on different aspects of the case, e.g. revisiting past triennial valuations.

“Without detailed calculations, it is very difficult to get a good assessment of cost.”

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