One year on from the Lloyds judgment, those of us who have revelled in the fascinating details of GMP equalisation are celebrating the one-year anniversary of the whole thing being kicked off.
So let’s take stock: what do and don’t we know, one year later?
Yup
- Benefits must be equalised for GMPs – as far as I’m aware nobody is disputing this legal obligation.
- It’s complex and will involve stakeholders and advisers working closely together.
- Data is going to be critical – we do have a clear picture of what data and other information will be needed, and how to cope with cases where this isn’t available.
- There is clear convergence around two main methods – the administration comparison method “C2” and the conversion method “D2”. Our recent survey suggests a clear leaning towards the latter.
- Some guidance is now available – specifically the DWP-GMP conversion guidance and the excellent industry working group methods guidance – which provides helpful ways forward to many (though not all) of the tricky technical aspects of the project.
Nope
- In many cases the GMP reconciliation process is rolling on. While this is not a barrier to making progress on some key aspects of GMP equalisation, it nevertheless does need to be done and dusted before hitting the button on full implementation.
- The tax implications are still unclear. This is the ‘big one’ in terms of being a barrier to progress, as you do not want to risk members being hit with a hefty tax bill. The hope is that the HMRC working party issue guidance soon, and that it is laced with pragmatism.
- The treatment of past transfers and deaths (i.e. “no liability cases”) is also uncertain, and may be covered by the third Lloyds judgment. Again, let’s hope common sense prevails and schemes do not have to try to reconstruct transfer values that were calculated and paid back in the 1990s…For now, I would suggest that trustees put these cases firmly on the bottom of the ‘to do’ list.
So there you go – we’re well on the road but there are still a few hills to climb.
As we move into year two, the focus for all trustees, advisers and administrators should be to approach this project with positivity and pragmatism. GMP equalisation does not have to be painful – indeed, it might even be quite fun!