2018-11-21
On 26 October 2018, the High Court gave its judgment on the Lloyds case which concerned whether (and, potentially, how) members’ benefits should be adjusted to remove inequalities caused by Guaranteed Minimum Pensions (GMPs).
Background
The key question that was put to the High Court was whether trustees have to alter members’ overall pension benefits to remove inequalities introduced by GMPs (known slightly inaccurately as ‘equalising GMPs’). Most schemes have not to date equalised GMPs due to uncertainty over whether this is legally required and also the lack of a legally mandated or widely accepted method of equalisation.
Do GMPs have to be equalised?
Yes - Mr Justice Morgan held that the Trustees were under a duty to adjust members’ benefits to remove inequalities caused by GMPs accrued between 17 May 1990 and 5 April 1997 (17 May 1990 is the date of a ruling on equal treatment of men and women for the purposes of “pay”.
What is GMP?
GMPs were accrued between 6 April 1978 and 5 April 1997 by those who contracted-out of the State Earnings Related Pension Scheme or SERPS. They were designed to provide a pension at least as good as the statutory minimum.
The method for calculating GMPs is set out in legislation and can result in inequality for a number of reasons, including the fact that GMPs are payable from a different ages (65 for men, 60 for women) in line with previous State Pension Ages.
Impact on EDS Scheme
Like most occupational pension schemes in the UK the EDS Schemes made no allowance for the equalisation of any Guaranteed Minimum Pension members. Given the court ruling the Trustee are working with their advisors to review the calculation of benefits and to consider if there is the potential for additional payments to be made to members. Any adjustments is expected to be relatively small. We will contact members once this review is completed.
