Industry must step up planning to achieve desired GMP outcomes, says Aon
The industry needs to step up efforts to ensure guaranteed minimum pension (GMP) equalisation exercises are completed in time, and in a cost effective way, according to Aon.
The consultant said that, although the pensions industry has begun taking action on the equalisation of GMPs, more needs to be done.
In a recent webinar - held 100 days landmark after the High Court's landmark ruling - Aon found that 75% of participants had done an estimate of the liability increase caused by GMP equalisation, but just 5% so far had a full project plan.
Polling during the 300-participant session also revealed that more schemes are favouring the conversion method (method D2) - up 14% since Aon's previous webinar on the issue in November, despite further guidance needed from the Department for Work and Pensions (DWP). It also showed that preference for a dual record approach is down, but still relatively popular at 39%.
The webinar also looked at whether schemes' intentions on risk management had been affected by the demands of equalisation, and if they had been tempted to delay projects due to this.
Aon principal consultant Tom Yorath said: "Schemes are rightly waiting for guidance from the likes of the DWP and HM Revenue and Customs before deciding on which method to adopt, but this shouldn't get in the way of planning and preparation."
He added: "There is still a way to go before a method decision must be made. But as schemes work through the concept of GMP conversion, it is apparent this is not one thing but a spectrum - and this means that there is a range of options that schemes can take even if they select method D2."
Risk settlement group partner Mike Edwards said: "We are clear to trustees and employers that the message is ‘keep calm and carry on', with schemes maintaining their de-risking plans but taking care to ensure that these are ‘future proofed'."
He added that the project was likely to remain "at the front of trustees' minds" for at least two years.
Aon's previous webinar showed the industry was split on its approach to dealing with the GMP equalisation, which still proved the case in this follow-up webinar on 4 February.
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