Four out of 10 pension schemes recognise the need to move quickly on the issue of GMP equalisation of historic transfers according to research by Aon.
This issue affects transfers with GMP accrued from from May 17 1990 to April 5 1997, and paid before before the original GMP Equalisation court decision on 26 October 2018.
As part of it efforts to track progress on this issue AON has polled 300 schemes. This followed the November 2020 High Court ruling that Lloyds Banking Group pension scheme trustees are, in many circumstances, legally responsible for equalising employees’ GMPs, even if they had transferred out of a scheme before the original judgment.
The results showed that 93 per cent of the schemes polled had begun considering how they were going to incorporate historic transfer cases into their overall GMP equalisation project.
Among the respondents, 40 per cent recognised the need to deal with transfer cases where the data is readily available and before they get any harder and increase in complexity. Of these, 3 per cent of respondents described the matter as urgent, while 52 per cent of schemes preferred to focus on their existing members first, before addressing transfers.
Aon partner Tom Yorath says: “The task of equalising three decades of transfers is monumental – and many schemes are looking for pragmatic ways to approach the exercise. It is encouraging to see that almost every scheme has begun to consider how they are going to tackle this, but it is important to set a roadmap as early as possible to avoid timing and workload constraints.
“Half the schemes we polled were considering a sequential approach, looking first at the ongoing members of their scheme and then moving onto transfers. But while it can be understood why the focus is not placed on members who have left the scheme, postponing the task will add to the difficulty as members with whom you are not in contact move house or make further changes to their pension arrangements.”
He adds: “Where the data is readily available, around 40 per cent of schemes are aiming to deal with the transfer cases as soon as possible.
“The level of individual transfers has increased dramatically since the introduction of Freedom and Choice in 2015, and these recent cases should provide schemes with a reasonable level of data to calculate the top-up, contact the member and pay it faster and with greater ease.
“The remaining 7 per cent of schemes plan to tackle GMP equalisation of transferred members on an ad-hoc basis, which may be down to cost and bandwidth.
“However, given the complexity in dealing with the cases individually, an ad-hoc approach may end up being more expensive than managing cases through a bulk exercise. Although I recognise that schemes may have a few very historic cases with little or no data — for which a reactive approach can be the only option — trustees may find that for many schemes a bulk exercise targeted at cases with readily available data, may end up being the most cost-effective way to comply with the ruling.”
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