Having consulted on draft Regulations in 2012, DWP has now
issued a further Consultation proposing a new approach and method
for GMP equalisation. This article considers whether the new
proposals will bring finality. We conclude this is unlikely.
The Government's position is that schemes are obliged to
equalise benefits and that this includes GMP benefits accruing in
the period 17 May 1990 to 5 April 1997, after which GMPs cease to
The draft 2012 Regulations removed the need to identify a
comparator member for GMP inequality claims. The accompanying DWP
draft guidance proposed GMP sex equalisation would be achieved by
comparing, on a year for year basis, the position of male and
female members and paying the higher calculated benefit.
Industry almost informally advised this methodology. DWP
withdrew the draft Regulations and went back to the drawing
November 2016 Proposals ("New Proposals")
Barebones of the New Proposals:
one off conversion of members'
GMP benefits into other scheme benefits plus, where appropriate, an
uplift to iron out GMP sex inequality;
the entire GMP to be converted, not
just the GMP accrued from 1990 to 1997, and the conversion to
extend to survivors' GMP benefits;
the conversion process to use the
existing 'conversion' provisions in Pension Schemes Act
the Consultation includes an annexe
containing an 18 page note from the "Industry group",
explaining a ten-stage possible conversion methodology;
the Government believes this
methodology would be one way of equalising GMPs; and
scheme trustees together with the
scheme employer will decide whether to implement the conversion and
its terms. Obligation to notify members before and after the
conversion and no obligation to consult.
Problems with the November 2016 proposals:
timing – amending the existing
conversion legislation will require new primary
legislation; in other words, an Act of Parliament is needed and not
merely Regulations. The existing conversion provisions of the 1993
Act apply to the conversion of only members' GMP rights whereas
the New Proposals include survivors' GMPs.
The methodology is far from settled.
As the Industry group paper acknowledges, the ten stages are only a
"possible" model that might be used by
Will the New Proposals be implemented soon?
DWP goes out of its way to emphasise the tentative nature of the
New Proposals: the DWP refers to "challenges as to how
schemes should equalise GMPs"; and state that the
Government is not "placing any obligation on schemes to
use this method and the method is not a definitive statement of how
equalisation should be effected".
Besides the need for new primary legislation BREXIT, and the
Lloyds Bank members' action over GMP inequality, further
BREXIT - the Consultation
"seeks to clarify" the effect of Brexit on the
requirement to provide equal pensions. Beyond mentioning that
whilst the UK remain a full EU member the Government will continue
to "negotiate, implement and apply EU
legislation" not much is said in the Consultation about
The Lloyds Bank Union's claim, on
behalf of its members, that GMP sex equality is legally required -
the Union confirmed in September it still intends to make an
Employment Tribunal Claim. The Claim is a reminder that the
fundamental issues of the precise legal requirements re GMP sex
equality and, if there is an obligation to equalise GMPs, how this
is to be achieved, are still open legal questions. Given BREXIT and
the Lloyds Bank Union case, it is hard to see the November 2016 New
Proposals making much headway any time soon, even leaving aside the
significant work still needed to get the New Proposals up to
The Consultation closes on the 17th January 2017 and
the Government will then consider further. We doubt whether much
will happen quickly.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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