Govt urged to formulate GMP consequences guidance for pension trustees

Mercer has urged the government to work with HMRC and the pensions industry to formulate clearer trustee guidance on the consequences of guaranteed minimum pension (GMP) equalisation.

The firm said trustees would want reassurance that their GMP conversions were valid and without unexpected tax consequences for members, and asked the government to deliver a streamlined approach to providing the transfer top-up payments required.

This follows a recent further decision from the High Court that was handed down on 20 November 2020, which decreed that trustees of defined benefit (DB) schemes that provided GMPs should revisit and, where necessary, top-up historic cash equivalent transfer values that were calculated on an unequalised basis if an affected member made a successful claim.

Mercer GMP Equalisation Steering Committee chair, Adrian Hartshorn, said: “Despite it being two years since the High Court decision in October 2018 which confirmed that GMPs must be equalised, there are still areas of uncertainty, particularly but not exclusively in terms of GMP conversion.

“There is a real opportunity here for trustees to simplify benefits, help members to understand their benefits better, speed up processing times and manage admin costs. However, until trustees know their equalisation approach is achievable it can be difficult to take more than a few steps in that journey.

“And while the position remains unresolved, members could be missing out on payments from their pension scheme – in some cases, a member can be owed in excess of £25,000.”

Hartshorn continued: “Inefficient and burdensome administration requirements can be expensive, as is each trustee taking separate legal advice on tax questions which may be similar across thousands of other schemes. Ultimately these expenses draw on funds that could otherwise be used to pay member benefits.

“Delays in completing GMP equalisation also result in delays to pension scheme members receiving their due benefits. The government and HMRC need to work together to find a solution to this issue.”

GMP equalisation has been a hot topic since the landmark Lloyds GMP High Court case in October 2018, which ruled that the scheme must equalise pensions benefits for men and women.

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios