Pension industry groups have joined forces to criticise the governments proposals for pension schemes to equalise guaranteed minimum pensions, claiming they could add around £13bn to scheme liabilities.
Writing to pensions minister Steve Webb on Thursday, the Occupational Pension Schemes Joint Working Group also said the Department for Work and Pensions' proposed approach could cost £300m to implement.
They say imposing these costs on UK industry at a time of economic uncertainty would be 'unacceptable', and question whether the change, which the government is making to reflect European case law, is necessary.
The JWG is tasked with liaising with the government on workplace pension policies. The seven signatories to the letter sent last week include: the Association of British Insurers; the Association of Consulting Actuaries - whose chairman, Stuart Southall also chair's the working group; the Association of Pension Lawyers; the Institute of Chartered Accountants in England and Wales; the Investment Management Association; the National Association of Pension Funds; the Pensions Management Institute; and, the Society of Pension Consultants.
Together, they label the government's plans - which were outlined in a consultation which closed last week - a case of 'gilding the lily' by dealing with a European issue by introducing legislation which goes further than European law requires.
They call for the scope of the equality legislation proposed by the DWP to be reduced so it does not more than implement the Allonby court case which was the 'catalyst' for the government deciding to require all pension schemes to equalise for the effect of GMPs.
'Arguably, no legislation is needed at all as the courts will take the Allonby case into account. If nevertheless the government wishes to introduce changes to implement Allonby, the JWG members strongly urge the government to pare back the draft regulations so that they do not introduce other additional requirements in relation to GMPs that are not currently in law.'
The DWP was also urged to remove its equalisation guidance, which the signatories said was 'probably the most expensive' method which the department could have chosen to support.
In the letter, they explain that the method works on the assumption that every instalment of a member's pension would be calculated twice - the first based on male benefits and the second based on female benefits. For every pension instalment, the high of the two figures is then paid, which can result in a man and woman with the same employment history both receiving the same benefits.
'In our view this is unjustified expense: a more appropriate method would focus on raising the overall value of benefits for the gender with the lower actuarial value up to the higher actuarial value of the other gender,' the letter said.
'If the DWP is unwilling to support an equalisation method that equalises values, we would prefer there to be no DWP approved method. Indeed, as our analysis suggests that there will be a number of scheme specific issues and cases that cannot sensibly be covered in a standard piece of DWP guidance, our view is that guidance is unlikely to turn out to be helpful.'
The government is advised to step back from pushing pension schemes into a GMP equalisation review at a time when major changes are proposed for state pension provision. These may have significant knock-on consequences for GMPs, the letter said.
Minister should identify the interaction between these two projects before moving forward with any GMP equalisation plans, they added.
Further criticism of the plans came from the Pensions Administration Standards Association which also raised concerns over the cost of the proposed approach to equalisation.
Margaret Snowdon, chair of the PASA, said: 'The method proposed by Government, while appreciated, will result in considerable expense to schemes and employers every year and will not cover all of the complex benefits design and member situations experienced in most schemes of any age.
'There are many much simpler and lower cost approaches possible to address equalisation and we believe it is best left to individual schemes and their advisers to decide what, if anything, suits them best.'
The PASA also said it was concerned that the consultation contained a new legal requirement to equalise GMPs which was neither intended nor necessary.
'We suggest that Government makes it very clear to trustees, advisers and practitioners that the Consultation does not introduce a new legal obligation on schemes, but is a reminder that equalisation, including the effect of GMPs, is already a requirement and that schemes can no longer ignore equalisation based on the fact that no opposite sex comparator members exist,' said Ms Snowdon.
