GMP Equalisation Work Group ‘Call to Action’

On 16 July 2019, the cross industry GMP Equalisation Working Group published ‘A Call to Action’. The Group, which is chaired by the Pensions Administration Standards Association (PASA), was set up in January 2019 to provide guidance and assistance on GMP equalisation to all stakeholders involved in the operation of a scheme, including trustees, administrators, sponsors and advisers. This followed the High Court’s decision in the Lloyds Bank case, which clarified that trustees have a legal obligation to equalise benefits for the effects of GMPs.

The Call to Action sets out key considerations for trustees and their advisers, including the need for all stakeholders to work collaboratively and to identify good practice in relation to the planning, management and efficiency of equalisation projects. It also notes that, although clarification is still awaited on some points, there are three initial areas which should be addressed now:

understanding and progressing GMP rectification;
reviewing the quality of the data needed; and
managing impacted transactions (ie those which need to be completed now, but may need revisiting in a GMP equalisation exercise if the scheme still has not equalised for the effects of GMP).

The GMP Equalisation Working Group will be following up this Call to Action with a guidance paper on the relationship between GMP rectification and equalisation, and, later this year, will publish further advice on data, impacted transactions, methodology and tax.

GMP equalisation will be highly complex for many schemes, and this Call to Action is a useful reminder to trustees and their advisers of affected schemes of the need to act now to ensure the successful implementation of equalisation projects. Recently, it has also been confirmed that there will be a further hearing in the Lloyds Bank case on the question of whether schemes need to revisit past transfers out, which is expected to bring further clarity. The hearing is due to take place in early 2020.