Schemes already assessing impact of landmark GMP ruling

Written by Theo Andrew
08/11/18

A number of large defined benefit schemes have already started assessing the impact of the landmark High Court Ruling on guaranteed minimum pensions (GMP), it has been revealed.

According to their financial results published today, 8 November, AstraZeneca, Sainsbury’s, National Grid and Wincanton are already assessing how the ruling might affect their pension schemes.

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.

In its Q3 results, AztraZeneca said that it is currently working through the details of the ruling but that it is “unable to make a reliable estimate of any additional liability at this time”.

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.”

In its half-year report, Sainsbury’s noted: “The extent to which the judgement will increase the liabilities of the Sainsbury's Pension Scheme and reduce the net accounting surplus of £266 million as at 22 September 2018 is under consideration.

“Any adjustment necessary is expected to be recognised by the group in the second half of the period ending 9 March 2019.”

Cowling added that the cost is likely to range from 0 per cent to 4 per cent of a schemes liabilities and that schemes will have to make a “very broad brush assumptions” for 2018 year ends.

The ruling was delivered after a two-week trial in July, when 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.

The pensions industry has welcomed the “clarity” that the High Court ruling on guaranteed minimum pensions (GMPs) brings, but one expert has said the case highlights the “nightmarish complexity” of pensions legislation.

GMPs were first introduced in 1978 as a means of allowing schemes, such as those run by Lloyds, to contract out of State Earnings Related Pension Schemes (SERPS) as long as they were as good as the statutory minimum amount, which under current rules are allowed to be calculated differently for men and women.

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