Will GMP equalise itself this year?

Published by Lucy Cresswell on

As a new year rings out across the pensions industry, new business plans are being started and it is highly likely that Guaranteed Minimum Pension (GMP) Equalisation is heading to the top of trustees’ priority lists. So what can we expect to see relating to GMP equalisation in 2020 and will the dawn of a new decade see the sun setting quickly on this long running industry headache? 

To take the second question first: probably not. Whilst GMP equalisation is high on the priority list there are still a number of unanswered questions which appear to be holding trustees back. Also, some trustees don’t wish to be trailblazers, favouring being on the coat tails of others who are keen to progress at a pace.  

Will we have more clarity on GMP equalisation?

Rather helpfully though, we are expecting to see more guidance in 2020 which will help to clear up some of the unanswered questions and provide additional momentum to resolve the headache.  

Here are a few of the highlights we are eagerly awaiting as the year moves forward...

  1. HMRC Tax Guidance – We expect there to be clarification from HMRC as to the tax treatment of underpayments identified and corrected through equalisation, in particular the impact on lifetime allowance protection regimes.

  2. GMP Equalisation Industry Working Group Reconciliation and Rectification Guidance – Providing practical guidance as to what to consider when reaching a decision on whether to proceed with a rectification project or combine it with equalisation.

  3. GMP Equalisation Industry Working Group Data Guidance – The guidance is expected to include pragmatic solutions for data gaps and an outline of potential calculation solutions.

  4. RPI Reform – A consultation will begin in March regarding the UK Statistics Authority’s (UKSA) reform of the Retail Prices Index which would see RPI aligned more closely with CPI. A response to the consultation is expected by July and “should” provide certainty on the future of RPI which will allow actuaries to set the conversion terms for GMP conversion where RPI increases are involved.

  5. Historic Transfers-out – A court hearing has been scheduled for the Trustee of the Lloyds Bank Pension Schemes at the end of April/beginning of May to consider the extent of the Trustee’s obligations to revisit historic transfers-out. The outcome should be known by October, but hopefully before the summer break. 

How important is GMP equalisation?

GMP equalisation is going to be one of the biggest projects most trustees have faced in a long time, requiring significant planning, co-ordination and cooperation between trustees, sponsors and their advisers. So whether you are a trailblazer or a coat-tailer, with the rise of a new decade comes the significant opportunity to progress these first crucial stages of the project.

Stay up to date

Get the latest independent commentary and exclusive insights from a range of experts at the forefront of risk, pensions, investment and insurance – tailored to your preference.

Subscribe today