On 26 October 2018, the High Court judgment on the Lloyds case confirmed the need to improve benefits to make allowance for the inequality between males and females in Guaranteed Minimum Pensions (GMPs) – known as GMP equalisation.

This will mean increasing benefits and extra cost. The outcome also risks adding unnecessary complexity in running your pension scheme. We understand that this is unwelcome to both employers and trustees. We are working with our clients, helping them respond in a pragmatic and proportionate way. Our approach will help you manage down the cost and prevent unwanted administration burden.

The Judgment

The judgment confirmed;

  • Pension benefits must be equalised to allow for GMP inequality
  • Lower cost methods are acceptable
  • Benefits must be tested annually unless converted into other benefits. Conversion is an opportunity to remove future complexity and administration burden.

Employers on the front line

It will take many months and even years to confirm GMP benefits, decide on the approach, equalise benefits and ultimately make payments to members.

However, employers need to account for the cost now. A robust approach will be needed for audit but you will want to avoid overestimates - especially as the cost is expected to impact P&L.

We have developed a model that is helping employers reduce the cost - it can quickly calculate a robust estimate, reflecting your scheme.

Finally employer consent is needed to convert benefits.

Removing Complexity

We are already working with clients to explore removing complexity and cost through conversion. We are ready to help you obtain the best outcome as you work through equalising benefits for GMPs.

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Key Contact

XPS Pensions

Sankar Mahalingham


Call: 0118 918 5739

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