What is GMP Equalisation?
The aim of GMP equalisation is to make sure a member with a GMP relating to contracted-out pensionable service during the period 17 May 1990 to 5 April 1997 receives benefits which are not less than those that would have been provided had the member been of the opposite sex (the comparator) during this period. This does not change the total pension earned by the member at the date of leaving pensionable service as this is defined by the Scheme Rules, but only affects the split between GMP and “excess” pension. As there may be a difference in pension splits at DOL, GMP equalisation will potentially change how the pension increases in deferment and in payment.
Achieving GMP equality sounds simple, in practice there may be complexities caused by:
- The requirements of legislation governing GMPs which creates the inequality between the sexes.
- Missing or incomplete data as membership records are required back to 1990, including records for former members who no longer have a liability in the Scheme.
- The need to identify that part of each member’s benefit relating to the period 17 May 1990 to 5 April 1997 (both GMP and excess, split out by during and after the Barber window) and to construct those benefits that would be payable to an opposite sex comparator in respect of this period.
- Individual scheme benefit structures and how they treat members’ GMPs and benefits in excess of GMP.
- Dealing with any insured annuitants where adjustments might be needed
- Potential tax implications such as Lifetime Allowance, Annual Allowance and any protection in place for members.
In calculating whether there is an equalisation adjustment it should be assumed the comparator would have exercised the same options (e.g. early retirement, commutation, etc.) as the actual member, even where this may not have been possible for the comparator at the relevant time.
We have a five stage iterative process with regular reporting and refinement of the actual scope throughout the project to ensure that the work is carried out as efficiently as possible. For instance, we might conclude that females do not require adjustment or there is no “crossover”, in which case we would flag this early and agree whether these members can be excluded from the exercise saving the associated costs. For new schemes, we suggest that GMP equalisation is considered as part of the implementation which can reduce the overall cost and mean that any queries can be picked up with the outgoing administrators.
- Step 1: Initial analysis
High level look at electronic data and scheme benefit structure to identify which members may be in scope and the main differences between GMP and non GMP pre 6 April 1997.
- Step 2: Collate, review and improve data
This step involves reviewing records for members in scope (including no further liability members) and compiling sufficient information to undertake calculations. This work avoids undertaking detailed calculations on members that do not need adjustments
- Step 3: Analysis of options and calculations
Individual member calculations of adjustments to benefits
- Step 4: Decisions
- Step 5: Implementation