On the go: Trustees of defined benefit pension schemes must make considered decisions about whether data they may need for guaranteed minimum pension equalisation is cost-effective to obtain, according to new guidance on the process.
A working group headed by the Pensions Administration Standards Association released guidance for trustees undertaking GMP equalisation, the process confirmed as obligatory by an influential 2018 court case involving Lloyds Bank, on Tuesday.
GMPs are a hangover from the state earnings-related pension, from which employers could opt out, as long as they provided a GMP in return for their reduced national insurance contributions. Since the state pension system treated men and women differently at the time, GMPs also exhibit inequalities that must be ironed out under EU law.
The working group's technical guidance covers the data needed to carry out equalisation and how it might be obtained, calculation solutions, issues and workarounds, and obtaining reliable opposite sex comparators.
It warns that trustees' approach will need to be tailored to the specifics of their scheme, for example by splitting members into different groups and dealing with them at different times.
Some data may also be prohibitively expensive to obtain, and trustees should also ensure their approach is consistent with other GMP projects such as reconciliation and rectification.
"Part of the planning for a GMPE project could include a ‘dummy run’ with sample testing or first pass calculation runs. This will enable more issues to be resolved prior to the project going live," the guidance suggests.
Akash Rooprai, chair of the data sub-group of the GMP Equalisation Working Group, commented: “Understanding the availability and quality of the required data is key, and the guidance sets out the range of data trustees should consider obtaining. The GMP equalisation calculation approach also influences the data requirements, but conversely the data that is practicably available may influence the calculation approach."
Mr Rooprai said the guidance includes potential solutions for trustees who are unable to obtain all the data they might want, and urged schemes to begin work now.
“The crux of the message is clear: data planning and gathering needs to commence now, for everyone. Schemes shouldn’t believe difficulties in obtaining all the data are a barrier – there are options to work around some challenges,” he said.
The guidance can be accessed here.
