[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

PASA publishes GMP equalisation guidance

The Pensions Administration Standards Association (PASA) yesterday published guidance for UK schemes undertaking guaranteed minimum pensions (GMP) equalisation.

GMP equalisation to be "highly complex" ©iStock
GMP equalisation to be "highly complex" ©iStock

The guide identifies three areas that pension schemes should start working on as soon as possible, such as reviewing the quality of data needed for GMP equalisation.

The PASA said schemes should also begin understanding and progressing GMP reconciliation and rectification, and start managing impacted transactions.

“Equalisation has the potential to be a highly complex project for many schemes,” the chairs of the sub-groups that prepared the guidance said.

“We felt all stakeholders in the operation of a scheme could benefit from some information to help them take the first step on this journey – this aims to provide exactly that.”

The High Court ruled last year that benefits for members contracted out of the top-up state earnings-related pension scheme must be recalculated to reflect retirement ages in the 1990s.

It is thought that this could hit UK companies’ profits by £32bn, with up to eight in 10 of schemes’ employers forced to report the cost of GMP equalisation in their accounts.

The PASA’s GMP Equalisation Working Group said that trustees, managers, administrators, sponsors and advisers must work collaboratively to ensure the process is a success.

It also urged stakeholders to recognise which aspects of the equalisation project will be scheme-specific, and those that will be common to all schemes.

Moreover, the PASA urged pension schemes to identify good practice in terms of planning, management and efficiency.

“Taking early action will help trustees be in the best possible position to deliver this complex work,” the Pensions Regulator's executive director of regulatory policy, analysis and advice, David Fairs, said.

“We welcome the publication of this call to action which provides trustees and their advisers with practical guidance on how to take the first steps in meeting GMP obligations.”

Full guidance documents for data, impacted transactions, methodology, and tax will be issued later this year, while advice on the relationship between GMP rectification and equalisation will also be published.

Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession