The reconciliation and rectification sub-committee of the Guaranteed Minimum Pension Equalisation Working Group (GMPEWG) has published guidance on when to rectify for the effects of equalisation.
This is the working group's second batch of guidance, after its paper on methodology was published last year.
The industry-wide group - which is chaired by the Pensions Administration Standards Association - produced the guidance in relation to making corrections as a result of GMP reconciliation and rectification.
The guidance sets out four steps for trustees to take to ensure the right decisions are made for their scheme.
These include understanding the data, understanding the nature and timing of tasks, considering the impact on members, and documenting and considering the scheme's position.
GMPEWG chairwoman Geraldine Brassett said: "In the past, schemes would have undertaken GMP rectification once the GMP reconciliation was complete or nearly complete. However, the need to also undertake a project to equalise benefits for the effects of GMP may result in schemes questioning whether to undertake their GMP rectification exercise once reconciliation is complete or defer this and combine it with the GMP equalisation project.
"There isn't a ‘one size fits all' answer to this question, it's a scheme specific decision. The starting position should be that GMP rectification should be progressed in a reasonable timeframe. In cases where GMP rectification is delayed in order to combine it with GMP equalisation, the evaluation of the impact of doing so and the rationale for deferral should be clearly documented."
She added: "This new guidance will help trustees ensure they can be fully satisfied all members in scope are rectified and, where necessary, equalised at the right time."
The steps for trustees to take are as follows:
- Understand the data: the number of members requiring rectification and how this population overlaps with those in scope for GMP equalisation;
- Understand the nature and timing of the task: when to rectify benefits, the potential approaches available and how the rectification project dovetails with the work required for GMP equalisation;
- Consider the impact on members: who are in scope for GMP rectification of any delay whilst finalising the equalisation project;
- Document and consider the scheme's position: This focusses on the factors that will influence the decision about when to undertake rectification for those also impacted by equalisation.
Last year, the cross-industry working group formed five sub-committees to draft guidance and drive progress covering methodology, impacted transactions, data, tax, and reconciliation and rectification.
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