LONDON, April 20, 2021 – In November 2020, the High Court ruled that pension schemes will need to revisit individual transfer payments made since 17th May 1990 to check if any additional value is owed as a result of GMP equalisation. According to the latest estimates from Buck, a leading consulting, technology, and administration services firm specialising in pensions and employee benefits, there are over 400,000 past transfers, representing a total of £40 billion in transfer payments, which will need to be equalised.
Overall, U.K. schemes may need to top-up these historic transfers by an estimated £1.5 billion. This latest requirement adds to the larger challenge of GMP equalisation, which schemes have been facing since 2018.
While the majority of schemes have not yet begun the process of equalising past transfers, the scale of the problem may also be increasing. A Buck survey of around 300 pensions professionals found that over one third of schemes are still paying unequalised transfers, meaning there are a significant number of schemes continuing to add to the amount of GMP equalisation work they face.
In response to the ruling, Buck has updated its market-leading GMP equalisation solution, SquareTM, to allow for GMP equalisation on historic transfers as a separate add-on feature. Through Square, Buck is able to provide a one-off, self-contained project to deliver GMP equalisation for schemes, delivering a list of all member benefit adjustments and a quantification of the financial impact for the scheme.
Mark Williams, Principal at Buck comments:
“The challenge that lies ahead for schemes should not be underestimated. Undertaking GMP equalisation was already shaping up to be a complex, costly, and time-consuming task, and the latest High Court decision has only added to the workload of U.K. schemes. For many schemes, even just locating the affected individuals will be a challenge. Over the last decades, former scheme members may have moved, changed their name, transferred again into a new scheme, or even died. In some cases, trustees may have little more information to go off than the name of a scheme member and the year they transferred.
“Despite the difficulty of the task, schemes should not delay in facing it head on. Trustees need to act now to avoid prolonging the process and creating future problems for themselves. The first step should be to start building a GMP equalisation plan and begin collating the necessary data, as indeed we have already started to do at Buck in partnership with our clients. Whatever approach trustees decide to take, it’s vital that they begin making reasonable progress now to ensure that they are not opening themselves up to a potentially costly and damaging legal challenge later.”
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