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.
