Four years on from the High Court’s landmark ruling, very few schemes have completed the work required to ensure equal benefits are paid to men and women. A slow start was understandable but it’s now time to get moving — especially as many pensioners struggle to cope with the rising cost of living.
With this in mind we held a webinar on the theme: GMP equalisation: what’s the delay? With 220 attendees at the event, we covered these connected subjects:
- The barriers and challenges to completing GMP projects
- Finding the right balance between solving technical problems and the impact on member benefits
- The importance of tracking data in a robust way to reduce risk
This is the first of three articles on each of these subjects.
Pension equalisation: progress so far
Haven't thought about it yet = 3.65%
Developing the project plan = 19.71%
Doing some data work = 46.72%
Started calculations = 18.98%
Finalising calculations/preparing for implementation = 10.95%
Completed implementation = 0%
Of the schemes that attended the webinar only one in 10 was nearing completion of its GMP project. The rest were at a fairly early stage and a handful hadn’t started. These results aren’t surprising.
Schemes needed time to get to grips with the ruling and to wait for guidance on how to proceed. With no deadline, some trustees may have been dealing with more pressing matters, causing GMP projects to be pushed to the back of the queue. But after a series of updates from HMRC and industry bodies, schemes and advisors now have clear enough guidance to get on with the job.
The longer the delay the greater the amount will be owed to existing pensioners and the number of members being paid the wrong pension will continue to increase. These are legal and reputational risks. As trustees, it is your responsibility to make sure your members get the benefits they are owed when they are owed them. Members may not be happy when they eventually receive money they could have used to pay their bills – the uplifts will on average be small, but many members could receive material lump sums.
Stuart O’ Brien, a partner at the law firm Sackers, said guidance allows trustees to be pragmatic. Continuing to underpay or withhold back payments could start to create a bigger legal risk than getting on with the project and making corrections later, he said.
Barriers to GMP equalisation
Incomplete data = 22.69%
Capacity / resource of advisers = 16.21%
Necessary expertise = 6.98%
Clarity of guidance / legislation = 10.47%
Project costs = 10.72%
Governance burden for Trustees = 7.23%
Individual taxation = 3.24%
Scheme or individual member complexity = 15.21%
Communication with members = 5.49%
So what are the obstacles that are holding schemes back? Complexity and lack of capacity are the main themes that emerge from this poll.
Complexity comes in various forms — from problems with data to governance and communication with members. The result is that GMP equalisation can often get pushed to the end of already overstretched meeting agendas.
Capacity covers the limits of trustees’ expertise to make decisions on complex questions — and advisors’ ability to manage long-term projects with many moving parts. But it doesn’t feel right that these reasons are holding the industry back.
In the webinar, Mercer’s Sam Marshall echoed Stuart’s comment about taking a pragmatic approach, particularly when it comes to incomplete data. Sam also said it was up to advisors to shoulder most of the complexity burden and guide trustees when they need to be involved.
We will cover these subjects in greater detail in the next two articles in this series. In the meantime you can watch the webinar or contact us if you would like to discuss how we can help you navigate GMP equalisation.
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