DWP guidance gives green light for schemes to get ready now for GMP Equalisation
XPS Pensions Group (XPS) believes the Department for Work and Pensions (DWP) guidance on Guaranteed Minimum Pensions (GMPs) will deliver a pragmatic approach to both the payment of arrears and to future, equalised benefits.
Danny Vassiliades, Principal at XPS Pensions Group, said: “Since the landmark judgement of the Lloyds Bank case was handed down by the High Court in October 2018, there has been a period of uncertainty for trustees and employers. Providing this guidance which will help to determine a way forward for pensions schemes undertaking GMP equalisation is a step in the right direction. When undertaken in the right way, GMP equalisation can actually result in improvements to the running of pensions schemes and lead to cost savings as well as reducing complexity. GMP equalisation can be an opportunity for trustees to improve the running of their pension schemes and provide a clearer outlook to the long-term benefits of their scheme.”
The guidance published by the DWP last week was produced in order to assist occupational pension schemes that have yet to address inequalities in scheme benefits due to the existence of unequal GMPs. It describes how pension schemes could use the GMP conversion legislation to achieve equality going forwards and confirms that conversion, if done well, is an opportunity to simplify benefits, reducing ongoing costs and complexity.
The GMP conversion guidance sets out how trustees should consult with their pension scheme members and XPS believe that an important part of this consultation process is for trustees to ensure that all members be identified and accurately located so they can be offered clear communications when being consulted with on the changes proposed to their pension benefits.
Danny Vassiliades added, that with 16m deferred members in the UK, clean data will be the key to the success of GMP conversion. XPS have already undertaken over 140 member identification projects and located over 300,000 members in the past six months as part of the process of improving data quality for our clients. We have seen first hand the benefits that a rigourous approach to tracing can bring to Trustees, Sponsors and members alike.