Jonathan Stapleton says the GMP headache may persist as schemes take action following ruling.
Last Friday's High Court ruling on guaranteed minimum pension (GMP) equalisation provides some welcome clarification for schemes - clarifying that GMPs do actually need to be equalised and providing a degree of guidance on how this should be done.
As James Phillips points out in his recent article, GMPs have been a headache for the pensions industry ever since the ruling in the Barber v Guardian Royal Exchange Assurance Group case in May 1990 - a judgment which said normal retirement ages in occupational pension schemes must be the same for men and women, impacting how GMPs were calculated.
But, despite Friday's ruling, there is still likely to be confusion over the methodology trustees should employ to equalise pensions - with the range of options the court proposed being much more complicated than many will have hoped.
Trustees will now have to begin the challenging process of deciding which methodology they should employ to equalise pensions - working with their advisers to decide which options are allowable and most appropriate for their schemes.
However, as arrears will also need to be paid, the ruling will also mean that schemes will also need to look at how to correct past underpayments and consider whether they need to take action on things such as past transfers out and any buy-in policies they may have in place.
Then there are the costs. The judgment itself is going to add around £100m of liabilities to Lloyds' schemes but the cost to UK schemes as a whole is likely to be in the billions as members, largely men, receive windfalls.
And then there will be the cost of implementing the decision itself - with the legal and actuarial advice needed likely to result in huge bills for schemes.
While the Lloyds ruling provides schemes with some clarity, it has also opened up a whole new world of cost and complexity.
Jonathan Stapleton is editor of Professional Pensions
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