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The Actuary The magazine of the Institute & Faculty of Actuaries

GMP equalisation now a top priority for pension experts

Guaranteed Minimum Pensions (GMP) equalisation has soared up the ‘to-do list’ for pension professionals in the UK following a landmark Lloyds case late last year.

Increased focus on GMPs ©iStock

That is according to a recent poll of pension experts by outsourcing firm Equiniti, which found that 58% see GMP equalisation as a priority project over the next six to 12 months.

This is far more than the 15% that said the same last year, and comes despite a fifth of pension professionals admitting they have little knowledge of current GMP legislation.

The High Court ruled last October that Lloyds Banking Group must equalise its GMP for men and women – a decision that could impact eight in 10 employers and cost £32bn.

Equiniti’s propositions and solutions director, Chris Connelly, warned that the “clock is ticking”, and that the time for decision-making is fast approaching a “critical stage”.

“Pension schemes have had GMP equalisation looming over them for years now," he continued. "News that a second hearing on the Lloyds case will be in 2020 is likely to extend the saga. 

“However, it is no excuse for firms to continue postponing the problem – they must start assessing data and getting on with the corrections they will inevitably have to carry out.”

The research is based on feedback from pension scheme trustees, administrators and managers, and also found that a quarter now see working to a buyout or buy-in as a priority.

This comes after The Pensions Regulator (TPR) said it would focus more on schemes that don’t take data quality seriously, with good record-keeping crucial for GMP equalisation and buyouts.

However, the Equiniti research found that 42% of pension experts do not plan to embark on a project to improve their scheme’s TPR score.

“I understand schemes need to see which equalisation method would best apply to their circumstances, but action is needed before the regulator feels intervention is required," Connelly said.

“Good data is absolutely critical, yet it remains an undervalued aspect of scheme management. Some schemes may encounter huge problems if they don’t work on these fundamentals."

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