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Guaranteed Minimum Pensions (GMP’s) were introduced from 6th April 1978 as the contracted out equivalent of the State Earnings Related Pension Scheme. As state pensions were unequal in retirement ages between males and females, there is a strong argument that GMP rights should be treated in the same way. Sadly, the Government has previously not adopted this view and all schemes entering into the PPF have to equalise GMP’s.
A High Court judgment is expected to address a fundamental question as to whether it is necessary to equalise benefits for the effects of unequal GMPs and, if so, how. In July, Lloyds Banking Group launched its landmark defence against three female members of the Lloyds Banking Group pension schemes, who are claiming sex discrimination because their GMPs increased at a lower rate than male members.
The judgment should clarify whether trustees need to adjust benefits for differences between the GMPs for male and female members. If this is necessary, the judgment should also address whether this should be achieved through a single method or, potentially, a combination of different methods.
There will be a need to think about interim communication to members as this judgement will hit the press, even if the average person does not understand it.
If the judgment decrees that equalisation is necessary then regardless of the method chosen, we can be reasonably sure that the impact will add extra costs to the existing liabilities and adviser fees will be in addition. Ascot Lloyd are watching this case very closely and once the judgment is handed down we will be letting you know the likely implications. In the meantime, should you wish to discuss how this might impact on your pension scheme then please contact your usual Ascot Lloyd consultant or contact us directly on 01423 523311 and ask for a member of the pensions consultancy team.
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