GMP Equalisation
On 29 January, Angela Eagle, Minister for Pensions and Ageing Society, submitted a written statement to Parliament on the subject of Pension Schemes and Equality. It was thought that the statement was in the context of the equalisation of benefits, which include GMPs, for schemes whose assets are being transferred to the Financial Assistance Scheme (FAS). However, the statement appears to have the potential to include all schemes providing GMP benefits, and therefore could have far-reaching consequences for the pensions industry.
The subject of GMP equalisation has been simmering under the surface since the European Court of Justice made its judgement in the Barber case in May 1990. The judgement ruled that pensions were deferred pay and therefore scheme rules had to provide pension benefits equally to men and women. However, the Government’s view has always been that there is no need to equalise GMPs on the grounds that it was the overall benefit that had to be equalised rather than the components making up the benefit.
The Government’s position has clearly shifted in recent months with first the PPF (see December's Pensions Express article) and now the FAS looking to issue regulations and guidance on the equalisation of GMPs. In fact the ministerial statement takes equalisation one step further in stating that ‘… any inequality in scheme rules which results from the legislative provisions governing GMPs should be removed, whether or not a person can show that a comparator exists.’
The removal of the requirement for a comparator for schemes that may have to equalise benefits to take into account GMPs would go further than the current interpretation of the Barber judgement and the PPF’s proposed approach, and could significantly increase a scheme’s liabilities. For example, currently where there is an all male workforce, then no comparator is available and no improvement to benefits is required.
Whilst it remains unclear whether this statement refers to all schemes, or simply those entering the PPF and FAS, trustees should consider discussing the issue with their legal adviser, especially as the Government’s view is that trustees and others should act as if legislation requiring GMP equalisation is already in place.
