What is Guaranteed Minimum Pension (GMP) equalisation?


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Starting with the Barber decision on 17 May 1990, there have been a number of legal cases in the UK and European courts which have concluded that men and women should be treated equally in relation to their pension benefits, and this has resulted in many changes to the law in the UK. Crucially, the Equality Act 2010 consolidated the position to ensure equality of pension benefits in respect of service after 17 May 1990.

In October 2018, there was yet another High Court ruling in this ongoing chain of decisions. It this case, it was decided that the Lloyds Banking Group Trustees must 'equalise' for the effect of Guaranteed Minimum Pensions for men and women. This is a decision that will have significant implications for many defined benefit pension schemes, including some within TPT – here’s what it may mean for you.

What’s happening?

Following the ruling, any member who was in contracted-out service between 17 May 1990 and 5 April 1997 may need their benefits adjusting. Lloyds Banking Group Trustees – and many defined benefit pension scheme trustees - will now have to provide men and women with the same historical benefit for GMPs earned between 17 May 1990 and 5 April 1997. 

What does this mean for me?

Scheme members whose benefits are adjusted will see an increase in benefits. However, the adjustment may result in an average increase of just a few pounds per month. No benefits will reduce as a result of the ruling.

What happens next?

The work to equalise GMPs will be complex and long term. The government has confirmed it hopes to be able to provide the pensions industry with guidance 'in the near future' and further guidance is also required from the Department of Work and Pensions (DWP).

The DWP is also working with HMRC to establish whether the changes will need to be made to tax rules for those affected by the equalisation. Discussions between the Trustee and employers of affected TPT schemes will be taking place and members will be informed if they are affected in due course.