Pasa publishes GMP equalisation guidance

The Pensions Administration Standards Association (Pasa) has published its guidance note on how schemes should deal with common issues that could arise from implementing guaranteed minimum pensions (GMP) equalisation.

The document forms part of a series of notes offering guidance to UK pension schemes on how to adjust benefits following on from the High Court’s landmark decision in the Lloyds Bank case on GMP equalisation in October of last year.

The ruling forced UK schemes to equalise benefits for men and women, in relation to GMP, that were earned between 17 May 1990 to 5 April 1997.

The guidance, issued by Pasa’s GMP Equalisation Working Group, tackles how to approach a number of common issues that were not addressed by the High Court at the time of the Lloyds Bank hearing.

Duncan Buchanan, chair of the sub-group responsible for preparing the guidance, said that the High Court's had left many technical issues unanswered.

“These issues are unlikely to be subject to judicial consideration but need to be addressed by schemes implementing GMP equality,” he said.

“The GMP Equalisation Working Group was established to help schemes achieve GMP equality in a cost effective, proportionate and pragmatic way.

"For most members any changes to benefits will be modest and not all members will need an adjustment. This guidance note puts forward good practice suggestions as to how schemes may achieve GMP equality.”

Buck principal and London retirement practice leader, Mark Williams, welcomed the guidance and said that it would go some way towards making sure that schemes fully understand the complexities of equalising GMP benefits.

“As an industry, we still have some way to go in ensuring schemes fulfil the GMP equalisation requirement, but today’s guidance is a positive development in helping to support trustees and company sponsors as they navigate the GMP equalisation landscape,” he said.

Further guidance from the GMP Equalisation Working Group will be issued in the coming months covering data, impacted transactions and tax.

Pasa said that the group also intends to update its guidance in the future to reflect developments such as the outcome of the next installment of the Lloyds Bank case and any guidance from HMRC on the effects of the ruling on how members are taxed.

Lane Clark & Peacock partner, Alasdair Mayes, has called on the government to urgently clarify the tax implications of GMP equalisation.

“The political position in parliament changes from day to day, but I really hope that measures to streamline GMP Conversion are included in the Pensions Bill this autumn,” said Mayes.

“I know HMRC have also been working hard on the pensions tax implications. It would be very helpful if they could provide reassurance that equalising benefits will not have unreasonable tax consequences on members nor create disproportionate administration for schemes.”

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