Guaranteed Minimum Pension projects
For all your scheme's GMP needs, including reconciliation, rectification and equalisation
The legal position is clear. Guaranteed Minimum Pension (GMP) equalisation needs solving. Pre-requisite steps are GMP reconciliation and GMP rectification. Where these have not been completed, they should be considered together with GMP equalisation as part of the overall GMP project.
For trustees or sponsors of pension schemes, there are three stages to the GMP project:
Each of the three Guaranteed Minimum Pension stages are complicated. We have a tried and tested approach to ensure we get them done right the first time.
The diagram below sets out how the different stages of the GMP pension project fit together. Our experienced team, including a GMP specialist unit, will help you get your GMP project done. We are equally comfortable taking your project through from start to finish or picking up a subsection, whatever best meets your requirements.
The first step in your GMP project is to finish GMP reconciliation.
Some schemes will have completed this already. Others have been waiting for HMRC to issue “Final Data Cuts” to compare their GMP records with HMRC’s records to check they marry up before signing off the GMP Reconciliation.
We have significant experience with GMP reconciliation exercises, including agreeing scheme data with the Final Data Cut issued by HMRC, and HMRC’s online GMP tool (which sometimes provide different data to each other). We are also able to provide advice and assistance to in-house administration teams who are looking for professional support in this specialist area.
"A delay in the completion of the GMP reconciliation exercise can have knock-on effects for other activities that trustees may be considering."
Before starting the GMP rectification part of the project, trustees should consider whether to complete an analysis on the quality of the data (often known as a data gap analysis).
This an important preparatory step before the GMP equalisation part of the project. Whilst it can be carried out after GMP rectification, there are some advantages of completing it at this earlier stage. This process involves identifying gaps in scheme data at both a scheme and member level and deciding how best to resolve them. Using assumptions to deal with the missing data is often the best solution.
The rectification stage will make the required adjustments to members’ records and benefits which were identified during the reconciliation process.
We have developed a streamlined model to calculate and apply any adjustments to members’ benefits required as a result of reconciling GMPs. The model has been programmed on Penstream, our administration system, which is also used for the day-to-day administration of our clients’ schemes. This integration has a number of advantages including reducing the risk of errors in data extraction and importing, and providing a rigorous audit trail.
Our expert team will make the GMP process easy to understand.
We first discuss with you the different approaches to GMP equalisation in order to agree the most appropriate method for your scheme. There is no house view or one size fits all. Every scheme is different and it is really important that this is recognised. It is also important to recognise the crucial role the scheme administrator plays in the GMP equalisation process.
Once the approach has been agreed our expert team will carry out the calculations, provide clear reporting to the trustees (see sample graphs below) and a governance document setting out the approach in sufficient detail to support future transactions such as buyout.
"Barnett Waddingham has an outstanding work ethos; always keen to meet clients’ specific challenges with a sensible, personal and pragmatic approach, which sets it apart in the consultancy space. It puts member outcomes at the heart of everything it does."
One of the most important parts of the GMP project is to make sure that the communications to members are right. This complex topic needs to be explained clearly to members, especially if pensions are to be reduced as a result of GMP rectification.
We are experienced at communicating with members in this way – primarily through DrumRoll, our in-house creative agency – and will work with you to provide the best member experience possible.