18 April 2019
In my view the publication of GMP conversion guidance by the Department for Work and Pensions is a positive step towards helping pension schemes achieve real and meaningful simplification.
The default approach in the Lloyds Banking Group court case to equalise for GMPs is a highly complex “dual record” approach. I believe GMP conversion provides an opportunity to sweep away the complexity of both GMPs and dual records. Doing so takes us closer to the prize of being able to simplify benefits rather than add another layer of complexity.
In my experience, both pension scheme trustees and scheme sponsors are looking for a simple answer that will address GMP inequalities for good. With this guidance, achieving that aim is one step closer. By working together trustees and employers can provide simplified benefits that are easier for members to understand, easier for the trustees to administer and easier for the employer and trustees to insure.
The baton now passes to HMRC. I know that they have been working hard to develop guidance on the pensions tax implications of equalising benefits for GMPs. The formation of a working group with representatives from the industry in recent weeks is an important next step in trying to ensure that we can all focus on delivering equality for members in as simple and efficient a way as possible.
In the meantime, I recommend considering at a strategic level what the impact of applying GMP conversion to your scheme might be and whether dual records or GMP conversion would fit best with your long-term objectives.