Good news for GMP Equalisation - costs may be much lower than expected
The cost of accounting for GMP equalisation is less than 1% of total liabilities for over half of all schemes. This follows a survey of over 90 XPS Pensions Group clients with a 31 December 2018 year-end.
Wayne Segers at XPS Pensions Group said “This is good news for employers and shows the value of getting a robust estimate that takes into account the specifics of their schemes.”
“However, it appears to confirm a worry that the industry may now incur significant cost and administrative complexity with little real benefit for members. Given that, it is important schemes use the work needed on GMPs to drive improvements. Increasing data quality, streamlining benefits and removing GMPs for good can all help reduce cost and risk for employers, and help drive better options and outcomes for members. “
Those with a March year-end will benefit from a robust estimate of the cost to prevent charging any more than is needed in their accounts. While there are some rules of thumb on costs (e.g. lower costs if GMPs are a smaller part of the benefit), in most cases the costs are impacted by the specific circumstances and membership behaviour in each scheme.