HMRC forms GMP equalisation working group five months after Lloyds judgment
HM Revenue and Customs (HMRC) has formed a working group to help schemes consider the pension tax issues arising from the guaranteed minimum pension (GMP) equalisation process.
In its March 2019 pension scheme newsletter, published on 29 March, the tax office announced it will chair the group with industry representatives, working alongside groups which are looking to address the wider issues surrounding the equalisation exercise.
The creation of the group comes nearly six months after the landmark High Court judgment in the landmark Lloyds case, which said defined benefit schemes must equalise GMPs between men and women.
A major concern the group will address is whether a saver whose pension is increased as a result of GMP equalisation could find they have unknowingly invalidated their fixed protection against cuts in the lifetime allowance (LTA) for pension tax relief.
In extreme cases this could mean that someone who thought they had locked in to an LTA of £1.8m is now faced with an LTA of £1.03m (rising to £1.05m next week) and potentially faces a six figure tax bill.
Until HMRC resolves this issue, savers remain at risk of unexpected tax bills, it was warned.
The first group meeting will take place later this month, just over five months after the judgment.
Royal London director of policy Sir Steve Webb condemned the department for "moving at a snail's pace" to resolve uncertainties surrounding the process of equalisation.
He commented: "There are savers at risk today of facing huge tax bills because a GMP adjustment invalidates their protection against LTA tax charges.
"Yet all we are promised is a new working group which has not yet started to meet. HMRC needs to appreciate that savers need to know where they stand and treat it with far greater urgency."
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