'No excuse' for industry slipping from GMP equalisation timescale targets
The lack of clarity from HM Revenue and Customs (HMRC) on guaranteed minimum pension (GMP) equalisation is “no excuse” for stalling implementation, says Aon.
The firm's latest webinar revealed the biggest factor holding schemes back from starting the process of equalisation is a lack of clarity from the tax office, but noted a significant amount of work can and should be started in the meantime.
A growing number of schemes are recognising their equalisation projects will be completed later than initially expected. The estimated timescales for completion have changed since Aon's previous webinar in February with just 2% of schemes, down from 28% expecting to be finished in 2020.
Most of the 150 participants questioned revealed they expect to complete the process by the end of 2023, while 15% expect it to take longer.
Partner and head of GMP equalisation Tom Yorath said: "Early movers who have started to tackle this task have consistently found issues with data. What takes time and involves cost is getting the data right. Schemes can start identifying and addressing data quality issues now even if they haven't made a final decision on how to equalise.
"The finite amount of relevant expertise both within in-house teams and in the industry as a whole, is another reason for schemes to begin the process early and to ensure they are at the front of the queue for getting the external support they will need."
Aon's results also revealed an even split between the chosen method for equalisation, with 49% selecting method C2, up from 39% in February, and 50% selecting method D2.
This comes after the industry revealed the tax guidance is the "missing piece of the jigsaw" in the GMP equalisation process and many stated they will hold back on starting the project until it is published.
Last month, HMRC revealed its long-awaited tax guidance covering GMP equalisation will be published in December and is set to cover the lifetime allowance (LTA), LTA protection regimes including enhanced, fixed, and individual protection, and the annual allowance.
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Schemes and their administrators have rightly received much praise for ensuring that pensions have continued to be paid in full and on time during an unprecedented period of disruption.
