Buck survey shows that 75% of eligible schemes are now allowing for GMP equalisation in transfer values

Buck survey shows that 75% of eligible schemes are now allowing for GMP equalisation in transfer values


13 (long) months on from the Lloyds Judgment and much is left to do to implement GMP equalisation. The recent publication of the Industry working group methods guidance, as well as the newly-promised Christmas present of HMRC tax guidance, may yet open the gateway to schemes making real progress with the project.  However, there is still a fair way to travel.

This has led an increasing number of Trustee boards to decide to start allowing for GMP equalisation in transfer values, thereby ‘turning the tap off’ on the transfer cases that may need to be revisited later in the project. The extent to which stones will need to be upturned on past transfer cases – or exactly how this might be done – is far from clear; however, it does look like it is going to be a painful and costly process.  Adjusting transfer values now should be an effective way of limiting this damage.

There are a variety of transfer value approaches out there in the market, for example:

  • Making an approximate allowance for GMP equalisation on top of the transfer value (which is otherwise calculated exactly as it was before);
  • Adopting a whole new process or software tool for calculation of transfer values, that fully incorporates GMP equalisation.

The practicalities and costs of these different approaches can be markedly different; however the overall impact on the evolution of the GMP equalisation project should be similar.

At Buck, our latest survey of UK schemes which have GMP shows that around 75% of those schemes are now allowing for GMP equalisation in transfer values. Where schemes are not doing so, it is often due to extreme infrequency of transfer value requests.

This is a good sign – not just for transfer values, but for the wider GMP equalisation project, in that it indicates that Trustees are starting to engage in the process. Trustee engagement and timely decision making is going to be key as we move into the next phase of the project and begin making important and technically complex decisions around the method and assumptions to be used for full implementation of GMP equalisation.  It is going to be fun…

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