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GMP Equalisation
11 December 2018

GMP Equalisation

What are GMPs?
Guaranteed Minimum Pensions (GMPs) were accrued by members of schemes that ‘contracted out’ of the State Earnings Related Pension Scheme (SERPS) from 6 April 1978. GMPs were designed to provide a pension at least as good as a statutory minimum and, in return for paying lower National Insurance contributions, a deduction was made from members’ state pensions. The GMP therefore is a component of a member’s total scheme pension. However, with changes to the state pension, the future accrual of GMP was abolished from 6 April 1997.

What is unequal about GMPs?
The treatment of GMPs is set out in legislation. However, as this attempted to mirror the state pension given up, GMPs for males and females are inherently different. For example, GMPs are payable from age 65 for men and 60 for women, and accrue at different rates (typically, a female’s benefits accrued more quickly than a male’s).

The Barber case ruling
The Barber case of 17 May 1990 resulted in the European Court ruling that occupational pension schemes were deferred pay, and as such, schemes were required to treat men and women equally. This meant that schemes ‘equalised’ their retirement ages and adjusted their benefits accordingly.

However, as GMPs were designed to integrate with the then state pension and the rules set out under legislation, there has been a long running debate as to whether the Barber case applied to GMPs.

The High Court decision involving Lloyds Bank
As you may have seen in the news recently, on 26 October 2018, the High Court has ruled that Lloyds Banking Group plc must remove the inequality caused by the GMPs earned from 17 May 1990 (the date of the Barber case) up to and including 5 April 1997 (when GMPs ceased to accrue).

While the judgement relates specifically to the Lloyds Banking Group plc pension schemes, it is likely to create a precedent for other UK defined benefit schemes with GMPs, like ours.

How am I affected?
It could affect you if you were an active member of a ‘contracted out’ scheme within the Fund between 17 May 1990 and 5 April 1997.

Official guidelines on how GMPs should be equalised are not yet available, but the Trustee is monitoring the situation and will work with its advisers as required.

You don’t need to do anything as we will contact any members who are affected by this in due course, although this may not be for some time due to the complexity of the case. Meanwhile, please don’t worry as we will continue to provide benefits on the current basis.

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