GMP equalisation — no time for delay

It's time to get to work on equalising guaranteed minimum pension (GMP) benefits for men and women.

Four years on from the High Court's landmark ruling, most defined benefit schemes have made little progress on pension equalisation. But the time for delay is over.

There is a clear enough picture about how to proceed — and back payments of hundreds or thousands of pounds could make a big difference for pensioners during the cost of living crisis.

With this in mind, Mercer's John Martin hosted a webinar in September on the theme: GMP equalisation: what's the delay?

The event was well-attended with 220 people taking part. We asked them four poll questions and the answers were illuminating. Here are the key results:

• While 11% of schemes were nearing completion of their GMP equalisation project, the majority were still at a relatively early stage and a handful hadn't started.
• Incomplete data (23%) was seen as the biggest barrier, followed by adviser capacity (16%) and scheme or individual complexity (15%) with governance, necessary expertise and lack of clarity also major concerns.
• Schemes' top priority (31%) was getting the job done with only 4% aiming for complete accuracy. Data management (21%) and cost of delivery (18%) were also judged important.
• On a scale of 1-10, only 6% of schemes were very confident (9-10) that they had enough support and more than one-fifth scored 5 or less. Almost three-quarters of schemes were reasonably confident (6-8).

Take a pragmatic approach to pension equalisation

Stuart O'Brien, a partner at the law firm Sackers, told the webinar that trustees had needed time to digest the judgment and wait for guidance but that there was now sufficient clarity for schemes to get going on GMP equalisation.

Stuart said trustees can and should be pragmatic, especially when payments due to members could be significant in the current climate. Continuing to underpay or withhold back payments starts to create a bigger legal risk than getting on with the project and being prepared to correct things in future, he said.

Fear of complexity has contributed to schemes delaying getting down to work on GMP pension equalisation. Mercer's Sam Marshall told the webinar that advisors should handle most of this burden and guide trustees through the areas where they need to be involved.

Data quality is a major consideration for schemes embarking on GMP pension projects. Sam stressed that with data often missing it is fine to make assumptions based on partial information to get the job done. Brendan Doherty, CEO of pension software firm Intellica, told the webinar that existing administration systems are not equipped to cope with data that evolves over a year-long pension equalisation project. GMP's numerous moving parts have also exposed the limitations of Excel spreadsheets, he added.

To address these issues, Mercer has developed a GMP data management platform with Intellica that tracks data throughout the project to provide an audit trail. Brendan said one of the platform's key benefits is making it easier to understand data issues and their impact so that you can start to make calculations earlier. The platform is available to all schemes working on GMP equalisation whether Mercer is the administrator, the adviser or neither.

You can watch the webinar here or contact us if you would like to discuss how we can support your GMP equalisation project.