We use some essential cookies to make this website work. So-called 'anti-franking' legislation operates to prevent the member's Excess being used to satisfy the obligation to revalue the member's GMP during the interval between the member leaving contracted-out service and the GMP coming into payment. The guidance highlights tax issues which schemes may face when adjusting benefits to correct for the inequalities of GMPs and it identifies possible approaches for dealing with those issues. Do you need to cover some or all pre-1978 service too? As outlined above, GMP Working Life is the period starting from the later of 6 April 1978 (when SERPS began) and the tax year in which the individual achieved age 16, and ending at the tax year in which they achieved: This reflected the former state pension ages and is the root of the inequality that is inherent in GMPs. You can navigate between these Insights using the links below. We also use cookies set by other sites to help us deliver content from their services. The current position The October 2018 Lloyds Bank judgment made it clear that all trustees need to equalise GMPs. View PDF. Gowling WLG is an international law firm comprising the members of Gowling WLG International Limited, an English Company Limited by Guarantee, and their respective affiliates. The High Court has published its judgement in the case of Lloyds Banking Group Pension Trustees Limited vs Lloyds Bank plc (and others). There are specific rules relating to the accrual and payment of GMPs. However, GMPs are still payable from age 65 for men and age 60 for women. This is a major undertaking. From that point, GMPs no longer form part of members’ pensions. So, counterintuitively, giving somebody a bigger GMP could make them worse off, because the total pension is still the same; and by making the GMP bigger, one simply makes a larger proportion of the pension subject to the less generous pension increases. In Williamson (H00177) there was a specific complaint that failure to equalise Guaranteed Minimum Pensions had adversely affected a member. … Schemes may choose this methodology or another. Partner - This involves holding dual records and carrying out two sets of calculations. GMP Equalisation - Made Simple Guide 29 June 2020 By Duncan Watson, CEO, EQ Paymaster The matter of guaranteed minimum pensions (GMPS) may appear to have assumed great importance almost overnight, but in truth, it’s been a long time coming. 7 The same pension regardless of gender Same retirement age Was 65 for males, 60 for females in many schemes NRAs equalised mainly in the 1990s Same total pension on leaving scheme Same benefit payments Same for males and females in most schemes But men and women build up GMPs on different terms The Guaranteed Minimum Pension (GMP) rules were abolished from 6 April 1997. However, given the complexity of the subject the Lloyds Bank case could not deal with all issues that can arise in an equalisation project. On 6 April 1978, the government introduced a second tier of state pension provision in addition to the basic state pension. Admin & Data Forum 2021. For ease of reading, the following simplified description uses words whereas the legislation uses formulae. This issue affects transfers with GMP accrued from from May 17 1990 to April 5 1997, and paid before before the original GMP Equalisation court decision on 26 October 2018. Recap: Impact of GMPs in a DB scheme • The rules governing GMPs are found in the Pension Schemes Act 1993. Many scheme trustees are well underway with their equalisation projects, but this will now need to be extended to deal with the issues relating to past transfers. On 17 May 1990, the European Court of Justice ruled that occupational pensions were a form of deferred pay and, as such, it would be unlawful to discriminate between men and women in relation to the benefits provided (Barber v Guardian Royal Exchange Assurance Group). Jason Coates They are recommended to take their own legal advice when considering and undertaking equalisation. On 26 October 2018, the High Court handed down an important judgment on equalisation of guaranteed minimum pensions (GMPs) in Lloyds Banking Group Pensions Trustees Limited v … In a final salary scheme members' benefits may not be known until they leave pensionable service. All rights reserved. These two elements are usually [4] increased differently, both in respect of: The increases payable on the GMP may be less generous than the increases payable on the excess. GMPs and equalisation: the story so far. A condition of it being used to contract-out was that the scheme provided a defined benefit (known as a GMP). The difference is due to the : Conversion can be used as part of a process by which schemes can remove any inequality between men and women resulting from the GMP rules. Dividing by a smaller number gives a bigger result. The GMP inequality issue 3. GMP equalisation. These rules can create administrative difficulties for pension schemes which may have adopted different rules for other scheme benefits they pay, and also for schemes that have accepted transfers which include GMPs. Most occupational pension schemes followed the state pension system in having unequal retirement ages for men and women (usually, but not always, age 60 for women and age 65 for men). This is a major undertaking. So-called "anti-franking" legislation operates to prevent the Excess being used to satisfy the obligation to revalue the GMP during that interval. This is further complicated because of how GMPs interact with the rest of their scheme benefits (the Excess) when pensions are revalued in deferment and increased in payment. Early in 2019, the Pensions Regulator announced the formation of an industry working group to help pension schemes following the High Court’s ruling on the equalisation of GMPs in October 2018. However, past accruals remain and a scheme that was contracted-out must still provide a pension at least as good as the GMP in respect of contracted-out service for any time a person was a member of that scheme, up to and including 5 April 1997. This description only applies to GMPs accrued since 6 April 1988 [3]. The method of equalisation applied must cause minimum interference for the parties involved. This element tends to favour men as, when the test is applied five years later, there is five years' more GMP revaluation to be protected by it. The judgment in the Lloyds case considered a number of methods by which pension scheme benefits might be adjusted for Guaranteed Minimum Pension (GMP) equalisation. SFDR explained: actions for Asset Managers and Investment Advisors. By not making an adequate transfer payment that reflected the equalisation of GMPs, trustees breached that duty at the time … However, from that point on, the main benefit is divided into two separate elements of pension: the GMP, and the remainder of the pension above the GMP (i.e. Analysis Pensions. The legislative requirements for GMPs can give rise to a difference in treatment between men and women which schemes are required to address in accordance with their equal treatment obligations. Duty to equalise GMPs: The duty of transferring trustees to pay a CETV that reflected equalised benefits extended to equalised GMPs. Each member and affiliate is an autonomous and independent entity. A new ruling by the High Court means that trustees of defined benefit (DB) pension schemes must revisit and equalise guaranteed minimum pensions (GMP) for historic transfers.. Put simply, a woman can accrue the same GMP as a man in a shorter time. On 20 November 2020, the High Court ruled that pension schemes will need to revisit individual transfer payments made since 17 May 1990 to check if any additional value is due as a result of GMP equalisation. On 26 October 2018, the High Court handed down an important judgment on equalisation of guaranteed minimum pensions (GMPs) in Lloyds Banking Group Pensions Trustees Limited v … The Lloyds judgment leaves a number of questions unresolved including crucially the method to be used to equalise. At the point in time when the member ceased being in contracted-out pensionable service, the GMP simply underpins the main benefit. Although GMPs ceased to accrue in 1997, equalisation is concerned with adjusting the excess to take account of unequal GMPs. In addition, women's GMP becomes payable five years earlier (i.e. This additional state pension was called the State Earnings Related Pension Scheme (SERPS). As well as a consultation on draft regulations, the DWP is also consulting on a “possible method for equalising pensions for the effect of the [GMP]”. GMPs reflect state pension entitlement that for some members is based upon a state pension age that was different because of their gender. This Insight is the first in our updated series of Insights on GMP equalisation. On 26 October 2018, the High Court handed down an important judgment on equalisation of guaranteed minimum pensions (GMPs) in Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank plc and others [2018] EWHC 2839 (Ch) (28 October 2018) (Lloyds).. 2019 could be the year that all this changes and it will be important for schemes to get ready. What have the DWP and HMRC provided in terms of guidance? The man's GMP comes into payment at 65 with no such enhancement. A proposed methodology can be used - but is not the only method available. Our 'Guide to GMP equalisation and how to deal with it' (the Guide) brings together all of our thinking on this issue in a single place. GMP Equalisation. What is unequal about GMPs? Allowing for GMP equalisation in transfer values now seems the more attractive option. A court ruling was announced on 26 October 2018 to determine whether members' benefits should be adjusted to reflect gender inequalities in Guaranteed Minimum Pensions (GMPs), and if so, how. A woman could accrue the same GMP as a man in a shorter time. A woman's GMP would often be postponed (e.g. The Ombudsman has now decided, after scrutiny of European and domestic law, that GMPs … It will take only 2 minutes to fill in. The problem is then compounded by the fact that the woman's GMP not only accrues faster, it becomes payable five years earlier, at age 60, whereas a man's GMP payment age is age 65. For a summary and analysis on what the Lloyds case now requires to be done about this, and the implications, please see our Insight 'What did the Lloyds cases say'. equalisation of GMPs. [4] But not always - the benefit design of the scheme in question always needs to be specifically checked. The ways to do this have changed from time to time, but for present purposes, we are concerned with the option that existed from 1978 to 1997 for employers to provide occupational pension schemes that included a promise to pay GMPs, in return for being able to contract out of SERPS. There was logic to that: because a woman's working life was shorter, she needed to be able to accrue her GMP faster in order to get the same overall benefit. The operation of this legislation is notoriously convoluted and the details are beyond the scope of this Insight. A recent determination of the Pensions Ombudsman has put the spotlight back on the vexed question of equalisation and Guaranteed Minimum Pensions. However, the career average nature of the GMP benefit, and its interaction with the overall benefit payable by the pension scheme, makes GMP equalisation considerably more complicated than equalisation of most non-GMP benefits. The Month In Pensions – February 2021 – The end of the quarterly trustee meeting? HMRC has published guidance on guaranteed minimum pension (GMP) equalisation, ... Government publishes guidance on equalisation of GMPs. To help us improve GOV.UK, we’d like to know more about your visit today. The position in any particular pension scheme may deviate from the position set out above, but the above will apply to most pension schemes which were contracted out in the relevant period. After years of speculation, the DWP has finally published proposals for dealing with the intrinsic inequality of GMPs. A new ruling by the High Court means that trustees of defined benefit (DB) pension schemes must revisit and equalise guaranteed minimum pensions (GMP) for historic transfers.. A GMP is a career average benefit. However it may be a while yet before the dust finally settles and all questions around GMP equalisation … After 28 years of uncertainty, the Lloyds judgment on 26 October 2018 confirmed that schemes must equalise benefits between men and women where differences arise from the statutory calculation of Guaranteed Minimum Pensions (GMPs). 7th November 2019 6:00 am 11th November 2019 5:58 pm. For a PDF version of this Alert please click here. This was designed to reflect a shorter working life for women. It will be useful for those who are new to this subject or for anyone wanting a refresher on this complicated topic. If you need a refresher about GMP and why equalisation is needed, we have produced a brief background document. Looks at the debate around the equalisation of GMPs and the recent High Court judgment in relation to the Lloyds Bank pension scheme. Given this uncertainty, GMPs were excluded from the equalisation exercises of the 1990s. The legislation enabling GMP conversion is provided by sections 24A-H of the Pension Schemes Act 1993 (PSA 1993) and regulations 27 and 27A of the Occupational Pension Schemes (Schemes that were Contracted-out)(No 2) Regulations 2015 (the 2015 Regulations). The judgment confirmed that the Trustee was “under a duty to amend the schemes in order to equalise benefits for men and women so as to alter the result which is at present produced in relation to GMPs.” The law lords also provided a number of calculations they considered to be most appropriate for undertaking equalisation. No comments. when SERPS started) and the tax year in which they reach age 16 and ending at the tax year in which they reach age 60 for women but age 65 for men (GMP Working Life). The aim of a GMP equalisation project is to make sure a member with a GMP relating to contracted out pensionable service during the period 17 May 1990 to 05 April 1997 2 receives benefits which arent less than those All content is available under the Open Government Licence v3.0, except where otherwise stated, Equalising pensions for the effect of inequalities caused by GMPs, sections 24A-H of the Pension Schemes Act 1993 (PSA 1993), regulations 27 and 27A of the Occupational Pension Schemes (Schemes that were Contracted-out)(No 2) Regulations 2015 (the 2015 Regulations), Pension schemes: request GMP calculations by uploading CSV files, How pension scheme administration is affected by the ending of contracting-out, Check scheme details using the Scheme Reconciliation Service, Coronavirus (COVID-19): guidance and support, Transparency and freedom of information releases, different ages at which men and women are entitled to receive their, fact that schemes often provided for different rates of revaluation and or indexation on the part of the pension underpinned by the. Trustees and sponsoring employers of relevant occupational pension schemes now face the difficult and costly task of implementing equalisation. The administrator compares them at retirement and potentially every year thereafter, paying the largest. Since the judgment was handed down, trustees and employers of occupational pension schemes, and their advisers, have had … [1] Although the GMP can and does differ from the corresponding SERPS benefit in certain circumstances. The new judgement, issued on 20 November, ruled that Lloyds Banking Group pension scheme trustees are legally responsible for equalising the GMPs for the employees who transferred out of one of its DB pension schemes. GMPs, means many ancillary issues may never be subject to judicial scrutiny and therefore could remain unanswered by the Courts. the Excess). They provide that: – the GMP must be payable at “pensionable age” - 65 for men, 60 for women – it is calculated applying revaluation in deferment up to pensionable age – GMP is increased in payment from pensionable age, and