Pensioners owed as much as £25,000 in back payments from GMP equalisation
Since the Guaranteed Minimum Pensions Equalisation judgment in October 2018, pension scheme members could still be waiting to receive payments for as much as £25,000, according to research from XPS Pensions Group.
Guaranteed Minimum Pensions (GMPs) were built up by members in occupational pension schemes mainly in the 80s and 90s. In 2018 a judgment clarified that benefits earned needed amending to ensure that men and women are treated equally. Schemes and employers were made responsible for redistributing funds.
GMP equalisation affects almost every defined benefit pension scheme in the UK and the industry has estimated that five million people could be impacted. XPS forecasts that between 1.25 million and 1.5 million pensioners may be owed some form of back payment, if its findings are replicated across the industry.
XPS’ research reveals that the top 5% of pensioners owed money are owed on average £10,000 each, and in the most extreme circumstances pensioners could be owed up to £25,000. The average age of this group is 80.
The overall impact of GMP equalisation on schemes, and the cost to employers, is often relatively small. For over half of schemes it is less than 1% of overall liabilities. However, it can represent a significant amount for pensioners owed back payments, with the average payment due estimated at £1,000.
Vicky Mullins, GMP equalisation lead at XPS Pensions said: “We are seeing a tendency to push GMP equalisation into the long grass, but this is untenable given the average age of those owed money, and the not insignificant amounts of money owed. There has been plethora of guidance over the last two years from the Government and industry bodies, which has given schemes a clear way forward to manage the process.
“There is no reason why pension schemes cannot move forwards with GMP equalisation now. It is not as complicated as it first appears if you avoid getting bogged down in data. It is incredibly important that members receive the money they are entitled to, particularly at this difficult economic time where older pensioners may have significant need for income.”