Pension schemes are falling behind on GMP equalisation timescales and a lack of clarity from HMRC is no excuse for stalling implementation, according to Aon.

The consultancy recently polled 150 participants during one its GMP equalisation webinars and found that a lack of detail from HMRC on how to put equalisation in place, especially for high earners, is currently the biggest factor holding schemes back from starting the process.

It was also made clear that there is now an even split between the main chosen methods for conducting equalisation.

Estimated timescales for completing the process have changed significantly since Aon’s previous webinar in February of this year.

Schemes have recognised they are unlikely to finish in 2020 (falling from 28 per cent to 2 per cent) although they still generally hope to finish by the end of 2023, with only 15 per cent expecting to take longer.

Schemes were evenly split between adopting the “cumulative” C2 method (49 per cent) and the “conversion” D2 method (50 per cent). This compares to 39 per cent and 50 per cent respectively in the last webinar in February.

Aon argued that although schemes recognise that they are likely to finish GMP equalisation projects later than expected, they still have a significant amount of data work that should be started in the meantime.

Aon partner and head of GMP equalisation, Tom Yorath said: “It’s a positive sign that schemes are not underestimating the time it would take to implement GMP equalisation, given the scale of the project.

“However, waiting for clarity from HMRC is no excuse for halting planning and preparation. Early movers who have started to tackle this task have consistently found issues with data.

"What takes time and involves cost is getting the data right. Schemes can start identifying and addressing data quality issues now, even if they haven’t made a final decision on how to equalise.”

Yorath added that the finite amount of relevant expertise both within in-house teams and in the industry as a whole, was another reason for schemes to begin the process early and to ensure they are at the front of the queue for getting the external support they will need.

“Where it’s possible, it’s important to grasp the nettle now — understand what GMP equalisation may look like for your scheme and where you stand with data.”

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