Industry split on GMP approach

The pensions industry is split on how to approach guaranteed minimum pension (GMP) equalisation, as calls grow for more clarity on the High Court ruling.

In a webinar with over 500 attendees, 51 per cent said they were in favour of method C, a dual record approach, while 36 per cent said they would be in favour of method D2, conversion.

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, while the industry is still working out the total cost of the ruling.

Aon principal consultant, Tom Yorath, said: “It’s no wonder given the complexity of GMP equalisation that there is some divergence in opinion on the way to go about dealing with it. Both approaches have their pros and cons."

Under conversion, the complexity of GMPs is a lot easier but won’t be right for every member, creating its “own set of winners and losers”, while dual records avoid the problem, but come with a heavy administration burden.

“However, as tempting at it is to jump to an answer on which method to use, in practice schemes have a big preparation job to do first which will be needed whichever approach is taken,” Yorath added.

“While there is obviously concern in the industry, there is at least consensus on where the thinking and resource should be concentrated. It’s clear that pension schemes are keen to seek practical, pragmatic solutions and to manage the cost and time constraints.”

Yorath added that the industry must share its thinking in order for the most efficient approaches to be followed.

The webinar, hosted jointly by Aon and Sackers, also found that 71 per cent believe that cost and time it will take to manage the implementation of the ruling is the greatest concern.

    Share Story:

Recent Stories


A changing DC market
In our latest Pensions Age video interview, Aon DC senior partner and head of DC consulting, Ben Roe, speaks to Laura Blows about the latest changes and challenges within the DC sector

Being retirement ready
Gavin Lewis, Head of UK and Ireland Institutional at BlackRock, talks to Francesca Fabrizi about the BlackRock 2024 UK Read on Retirement report, 'Ready or not. How are we feeling about retirement?’

Podcast: Who matters most in pensions?
In the latest Pensions Age podcast, Francesca Fabrizi speaks to Capita Pension Solutions global practice leader & chief revenue officer, Stuart Heatley, about who matters most in pensions and how to best meet their needs
Podcast: A look at asset-backed securities
Royal London Asset Management head of ABS, Jeremy Deacon, chats about asset-backed securities (ABS) in our latest Pensions Age podcast

Advertisement Advertisement