GMP pension - ruling by SC

[chip*]

Interesting news popped up in my Google news feed with confirmed SC ruling on the GMP equalisation issue. Still early days for this news to flow down to the pension trustees, but if you have or had an old DB / GMP pension (one advantage to be old!), you could receive a top-up to your pension / transferred out amount. I suggest setting a reminder to call your trustee in the near future as the judgement does not require the trustee to proactively make these correction!

https://www.pensionsage.com/pa/High-Court-rules-DB...


As a result of the Lloyds judgment that came out today, trustees of pension schemes that have transferred out to other pension schemes have breached their duties where the transfer payments were not equalised for GMP.

"This means that members can successfully claim against the trustees of the transferring pension scheme and the receiving pension scheme and claim a top up payment to reflect the shortfall.

"However, the judgment does not require the trustees to proactively make these corrections to previous transfers. As a result, they do not have a set roadmap to resolve their breach, but they do not have any obligation to do anything following this judgment.

"Trustees can now decide if they want to remain with the uncertain possibility of unknown liabilities arising from members' claims, or if they want to take a complex, costly path to certainty by calculating and settling those liabilities now.”

Herbert Smith Freehills, regional head of employment, pensions and incentives, Samantha Brown, described the judgment as "another landmark ruling which extends the scope of schemes’ GMP equalisation exercises".

She added: “Once again, this ruling is likely to affect every DB scheme in the UK that provides GMPs accrued between 17 May 1990 and 5 April 1997.

"It means that trustees of such schemes are required to revisit cash equivalent transfer values paid to former members and make a top-up payment where a member has not been paid their full entitlement.”

Edited by chip* on Sunday 22 November 15:29

[Zigster]

I agree.

I suspect many people won’t either be aware of this or won’t understand what they need to do.

This weekend, I’m digging old paper work out of the loft in respect of a transfer I took in the mid 1990s, and will be writing to the trustees of that old scheme asking for a top up.

[Mazinbrum]

I’m still trying to work out what I need to ask for and a reason why I’m entitled to this top up assuming I am. Watching with interest though and I’m sure there will be more about this in the press.

[chip*]

Zigster said:

I agree.

I suspect many people won’t either be aware of this or won’t understand what they need to do.

This weekend, I’m digging old paper work out of the loft in respect of a transfer I took in the mid 1990s, and will be writing to the trustees of that old scheme asking for a top up.

I suspect this is the case for many pension documents / file and forget.
When I received the CETV transfer from my trustee, there was a section clearly explaining the GMP equalisation issue, plus any decent adviser should have explained to anyone undergoing a DB transfer with a GMP component.

Early days to know the exact top up, but I will register a claim to my trustee now and just wait and see.

[Mazinbrum]

I've just had a look at my transfer quote and there is a section on GMP followed by an additional section below so are there two issues here? Just trying to get my head around this before contacting them.


Equalisation of benefits
The Scheme provides equalised benefits for men and women apart from the part relating to Guaranteed Minimum pension. The cash equivalent transfer value provided for these benefits may be calculated using differing factors according to sex.

[anonymous-user]

I'm not a whizz on this stuff but I think the story goes like this,

• As a DB scheme member you probably paid a reduced rate of NI contributions. This is because the scheme promised to replace some of your state pension with this thing called GMP. In other words, your scheme was "contracted out of SERPS".

• Scheme rules could say what they liked about the bulk of your pension but for the bit that replaced SERPS the scheme had to promise to match the state benefits you had foregone. There are specific government rules about how GMP is calculated.

• When your scheme "equalised" your main scheme benefits between men and women they were able to decide how to do it.

• However, for the GMP bit they had to follow government rules but there weren't any yet, so correct equalisation of GMP was impossible. Schemes dealing with transfers-out erred on the cautious side and only paid out what they were obliged to in accordance with the then unequalised and/or uncertain government rules.

• Now that the Courts have delivered "certainty" schemes are in a position to calculate transfers-out of GMP correctly.

• Previous transfers-out which included some GMP accrued between 1990 and 1997 may now be known to be a bit lower than they should have been. As the judgment says, schemes aren't obliged to review ancient files and contact affected former members but such members can ask for their transfer-out of GMP to be reviewed, and increased if appropriate.

• I have no idea how schemes would actually be able to deal with this in view of closure/destruction of old files etc. I anticipate former members who wish to raise a claim about a historical transfer-out may need to start off with pretty good records of their own.