Jenna Towler talks to the industry about the government's move on guaranteed minimum pension equalisation.
Whenever you hear a pensions lawyer utter the words “we’re talking billions” in relation to a legislative change it is time to start listening, and probably start worrying.
That quote was just one response to the government’s move to force schemes to equalise guaranteed minimum pensions between male and female members. It would be fair to say the consultation, released last Friday, caused consternation among industry players (PP Online, 20 January ).
Allen & Overy professional support lawyer Giannis Waymouth spoke for many when she asked: “Why couldn’t they let sleeping dogs lie as industry bodies urged them to?”
Problems associated with GMP equalisation have hung over the industry since the 1990 European Court of Justice case, Barber.
That case ruled trustees had to pay equal benefits comparable to men and women in relation to service from 17 May, 1990. This was formalised into UK law through the Pensions Act 1995 and most schemes equalised pension ages and overall benefit scales between the sexes.
But virtually every scheme ignored the sex inequalities that existed in relation to GMP calculation because they broadly mirrored unequal state benefits.
GMPs – which arose where pension schemes contracted-out of the earnings-related part of the state pension (SERPS and S2P) – may be unequal because women receive their GMP at age 60 compared to 65 for men, and women accrue GMP at a faster rate in order to target equal levels of GMP at age 60 compared to age 65 for men.
Despite pleas from industry groups – such as the National Association of Pension Funds, the Association of Pensions Lawyers and the Association of Consulting Actuaries – to leave the problem alone, Department for Work and Pensions officials last week said schemes can no longer bury their heads in the sand.
A DWP spokeswoman said: “These draft regulations carry no new duties on pension schemes, but it’s right that schemes meet their legal obligations to treat men and women equally, and that’s why we are offering them help to do this.”
That help comes in the form of a suggested methodology for assessing GMP equalisation and a consultation asking the industry for its help and advice.
Waymouth, a member of the government’s working group on the issue, also questioned the government’s base position that GMPs had to be equalised to comply with EU law. She also said much of the industry feared the government’s position was wrong.
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