After 28 years of uncertainty, the Lloyds judgment on 26 October 2018 confirmed that schemes must equalise benefits between men and women where differences arise from the statutory calculation of Guaranteed Minimum Pensions (GMPs). Our website uses cookies to improve your user experience. The new judgement, issued on 20 November, ruled that Lloyds Banking Group pension scheme trustees are legally responsible for equalising the GMPs for the employees who transferred out of one of its DB pension schemes. Will auto-enrolment be reformed in the wake of Covid? As with all things related to pensions, the details are horrendously complicated, but the case revolves around an issue that is unique to the UK - Guaranteed Minimum Pensions (GMPs). This might be the case when, for example, a scheme rule already required equalisation, or where the scheme had committed to equalise benefits prior to the High Court ruling. Landmark pension equalisation ruling a ‘headache’ for schemes. Pension schemes may be facing massive economic liabilities following a recent high court ruling on gender equalisation. What does the new pensions legislation mean for employers? The Lloyds case looked at four different methods, with variations, to equalise GMPs and decided that the employer could require trustees to adopt method C2 – providing the minimum of what was legally required on the basis of minimum interference by the courts. Employers and employees who contracted out of the additional state pension paid lower NI contributions but the pension scheme had to provide a GMP at least equal to the additional state pension. The group will help develop and promote best practice on issues arising from the ruling, from how to address missing data through to dealing with transfer requests and rectifying underpayments. GMPs are taken at different ages – women at 60 and men at 65. 6776955. The total cost across all pension schemes with GMPs is estimated to be £15-20bn. In October 2018, the High Court ruled Lloyds bank scheme trustees must equalise benefits between women and men who have guaranteed minimum pensions because of contracted out benefits.. © Copyright Chartered Institute of Personnel and Development 2020, 151 The Broadway, London SW19 1JQ, UK Incorporated by Royal Charter, Registered Charity no. The ruling means that organisations should revisit historic cash equivalent transfer values (CETV) that were previously not equalised, and top up where necessary. What support is available for the long-term impact of the pandemic on staff mental health. The judgment from Mr Justice Morgan, issued today (20 November), ruled that Lloyds Banking Group pension scheme trustees are responsible for equalising the GMPs for members who transferred out of one of its DB pension schemes. If you continue browsing, we assume that you consent to our use of cookies. This method means that GMPs no longer have to be held within a pension scheme and future administration costs are reduced. This morning, 20 November 2020, the High Court gave judgment in Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank plc on the issue of transferring schemes' liability to make up shortfalls in transfer values calculated on the basis of unequalised GMPs. The pension industry is split on how to deal with guaranteed minimum pensions (GMP) equalisation following a landmark ruling that could add billions to UK schemes liabilities. A recent landmark court ruling has resulted in the requirement for occupational pension schemes to provide equal GMP benefits for men and women to reflect the equalisation of retirement ages in the 1990s. Sasha Butterworth is partner and head of pensions at UK law firm TLT, New Cross Gate, London predominantly, but also working across our school sites in south London. While the October 2018 ruling relates specifically to Lloyds Pension Schemes, it applies to any scheme contracted out between May 1990 and April 1997 and providing GMPs. Authors. When autocomplete results are available use up and down arrows to review and enter to select. Method C2 looks at the better of male or female GMP each year (allowing for interest and accumulated pension paid to date) and pays the higher amount to members each year. "This should be good news for some of those who took a transfer value as they may now be in line for a top up payment. Ian Wright. They will need to work closely with their legal advisers, accountants, scheme actuary and administrator to agree a detailed project plan to deliver GMP equalisation, including member communications. 1079797. "This should be good news for some of those who took a transfer value as they may now be in line for a top up payment. Registered office 1st Floor Chancery House, St Nicholas Way, Sutton, Surrey SM1 1JB, to improve your user experience. Method D2 uses the GMP conversion legislation to convert GMP to non-GMP benefits. However, this ruling did not apply to GMPs. Court ruling about pensions equalisation could take years and cost billions to implement. Competitive to reflect experience and expertise. Employers should also check recent corporate transactions to see whether GMP equalisation was included in the indemnities. The cost is very specific to a scheme's circumstances and membership. Following a 1990 court ruling, pension scheme benefits that differed for men and women had to be equalised. This means that members can successfully claim against the trustees of the transferring pension scheme and the receiving pension scheme and claim a top-up payment to reflect the shortfall. The judgment did not address how to deal with trivial commutation lump sums and serious ill-health lump sums that have been paid out. The interest for method D2 is decided by the scheme actuary. What will GMP equalisation cost employers? "The decision is far-reaching, spanning wider than just GMP equalisation and potentially affecting rectification projects in general. As a result, GMPs accrue at different rates for men and women and are revalued over different periods. Richard Evans. Accounting for obligations arising from GMP equalisation As a result, they do not have a set roadmap to resolve their breach, but they do not have any obligation to do anything following this judgment. Lloyds Bank GMP equalisation transfers judgment. Pensions - Articles - Pensions equalisation ruling may cost billions to implement A High Court ruling about pensions could have enormous ramifications for most final salary-type pension schemes. This is a major undertaking. This might be the case when, for example, a scheme rule already required equalisation, or where the scheme had committed to equalise benefits prior to the High Court ruling. A new ruling by the High Court means that trustees of defined benefit (DB) pension schemes must revisit and equalise guaranteed minimum pensions (GMP) for historic transfers. Prior to the Barber judgment, it was permissible and normal practice for UK occupational pension schemes to have unequal retirement ages between male and female members, usually at 65 for men and 60 for women. A High Court ruling on gender equalisation of pension payouts could have an estimated £15bn effect on major pension schemes. A few defined benefit pension schemes have already included an estimate of the effects of equalisation in the measurement of their pension obligation. The court ruling dictated that for any period of pensionable service prior to May 17, 1990, equalisation of pension ages was not required. The judgment suggests that many transfer payments made since May 1990 will need to be topped up, to allow for GMP equalisation. Experts have called for low earners to be allowed to opt out of pension contributions while still receiving them from their employer. Despite the ruling posing "practical challenges", Pinsent Masons partner and GMP equalisation lead, Stephen Scholefield, said it would provide "welcome clarity" to the industry. I am a member of the Teachers' Pension Scheme and would like to know if I am due any additional benefits as a result of the High Court ruling in November 2020 regarding GMP equalisation. Lane Clarke & Peacock (LCP) has warned that an “unwelcome year-end headache” is looming following last month’s GMP equalisation ruling, as XPS Pensions Group revealed schemes owe members up … Sasha Butterworth reports. After the date of the judgment, 17 May 1990, all UK occupational pension schemes were […] The total cost across all pension schemes with GMPs is estimated to be £15-20bn. A GMP is a minimum level of pension for members who were in a pension scheme which was contracted out of the State Earnings Related Pension Scheme (SERPS), on a salary-related basis. GMPs apply to pensionable service between 17 May 1990 and 6 April 1997. XPS revealed schemes owe members up to £32,000. GMPs are payable at state pension age which, throughout the period during which GMPs accrued (6 April 1978 to 5 April 1997), was 65 for men and 60 for women. But what would the impact be for firms? All of these may result in additional scheme liabilities and a further hearing may clarify this. To be discussed on appointment. He stated: “This ruling addresses the thorny issue of pension schemes picking up the tab for GMP equalisation for past transfer values. Trustees can now decide if they want to remain with the uncertain possibility of unknown liabilities arising from members’ claims, or if they want to take a complex, costly path to certainty by calculating and settling those liabilities now.”. Following the ruling in the Barber case by the European Court of Justice in 1990, trustees of pension schemes have had to pay equal benefits to comparable men and women in relation to service from that date. The legal position as regards a given transfer may depend on whether it was statutory or non-statutory, and on the relevant scheme rules and the forms signed by the transferee. Registered in England and Wales no. Therefore, as all parts of the pension receive full increases, the scheme pension is, once again, equalised. The court’s ruling in the Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank Plc & Ors case is a significant change for any pension scheme that provides GMPs for members, and employers should understand how these additional pension liabilities will affect them. This results in inequality in the GMP value at the point at which benefits are taken. 09 December 2020. The High Court has issued a long-awaited follow-on judgment in the Lloyds Bank case. Danyal Enver, associate at Arc Pensions Law, said: “As a result of the Lloyds judgment that came out [on 20 November], trustees of pension schemes that have transferred out to other pension schemes have breached their duties where the transfer payments were not equalised for GMP. On 20 November 2020, the High Court ruled that pension schemes will need to revisit individual transfer payments made since 17 May 1990 to check if any additional value … If a pension scheme has recently been wound up or the trustees have entered into a buy-in or are in the process of negotiating a buy-in or buyout, they will need to check whether GMP equalisation is dealt with under the agreement. Equal pensions are important but complexity of UK rules and poor data records will mean difficulties for pension … “However, the judgment does not require the trustees to proactively make these corrections to previous transfers. Under the rules of the Lloyds schemes, the trustees (or in one case the employer) had considerable discretion as to how non-statutory transfer values were calculated. I have contacted the Teachers' Pension Scheme and their response said: The interest for method C2 is 1 per cent over base rate. This ruling, based on Article 141 of the Treaty of Rome, was formalised in UK domestic law by section 62 of the Pensions Act 1995. What are the implications for employers of a High Court ruling that guaranteed minimum pensions (GMPs) should be equalised between men and women? GMP equalisation ruling causing 'headache' for many companies. If the LGPS currently equalises GMPs, why does GMP equalisation still matter? “However, at the time the state pension … A new ruling by the High Court means that trustees of defined benefit (DB) pension schemes must revisit and equalise guaranteed minimum pensions (GMP) for historic transfers. A court ruling was announced on 26 October 2018 to determine whether members' benefits should be adjusted to reflect gender inequalities in Guaranteed Minimum Pensions (GMPs), and if so, how. I am a member of the Teachers' Pension Scheme and would like to know if I am due any additional benefits as a result of the High Court ruling in November 2020 regarding GMP equalisation. GMP equalisation: Court ruling as to past transfers. The new judgement, issued on 20 November, ruled that Lloyds Banking Group pension scheme trustees are legally responsible for equalising the GMPs for the employees who transferred out of one of its DB pension … Pensions - Articles - Industry comment on GMP Equalisation ruling Aon, LCP, Hymans Robertson and Dalriada Trustees comment on the High Court ruling on the equalisation for GMPs of historic transfers out of the three largest Lloyds Banking Group pension schemes, which has significant knock-on consequences for the pensions industry. New rules on pension equalisation explained. If the employer agrees, then method D2 (among others) can be used. Threaded commenting powered by interconnect/it code. Almost three quarters seeking to complete back payments by 2022. A new industry group has been formed to help pension schemes following the High Court’s landmark ruling on the equalisation of guaranteed minimum pensions (GMPs). This morning, 20 November 2020, the High Court gave judgment in Lloyds Banking Group This includes considering which approach to take and factoring the impact of the decision into their wider business planning.
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