LONDON, 26 January 2021 – Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that 40% of UK pension schemes recognise the need to move quickly on the GMP equalisation of historic transfers. These are transfers with GMP accrued from 17 May 1990 to 5 April 1997, and paid before the original GMP Equalisation court decision on 26 October 2018.
As part of its efforts to track progress on the industry-wide GMP equalisation project, Aon polled 300 pension schemes on a recent webinar. This followed the November 2020 High Court ruling that Lloyds Banking Group pension scheme trustees are, in many circumstances, legally responsible for equalising employees’ GMPs, even if they had transferred out of a scheme before the original judgment. The webinar looked at when schemes planned to tackle the legal requirement to equalise historic transfers-out for the effects of unequal GMP, between 17 May 1990 and 5 April 1997.
The results showed that 93% of the schemes polled had begun considering how they were going to incorporate historic transfer cases into their overall GMP equalisation project. Among the respondents, 40% recognised the need to deal with transfer cases where the data is readily available and before they get any harder and increase in complexity. Of these, 3% of respondents described the matter as urgent, while 52% of schemes preferred to focus on their existing members first, before addressing transfers.
Tom Yorath, partner at Aon, said:
“The task of equalising three decades of transfers is monumental - and many schemes are looking for pragmatic ways to approach the exercise. It is encouraging to see that almost every scheme has begun to consider how they are going to tackle this, but it is important to set a roadmap as early as possible to avoid timing and workload constraints.
“Half the schemes we polled were considering a sequential approach, looking first at the ongoing members of their scheme and then moving onto transfers. But while it can be understood why the focus is not placed on members who have left the scheme, postponing the task will add to the difficulty as members with whom you are not in contact move house or make further changes to their pension arrangements.”
Tom Yorath continued:
“Where the data is readily available, around 40% of schemes are aiming to deal with the transfer cases as soon as possible. The level of individual transfers has increased dramatically since the introduction of Freedom and Choice in 2015, and these recent cases should provide schemes with a reasonable level of data to calculate the top-up, contact the member and pay it faster and with greater ease.
“The remaining 7% of schemes plan to tackle GMP equalisation of transferred members on an ad-hoc basis - which may be down to cost and bandwidth. However, given the complexity in dealing with the cases individually, an ad-hoc approach may end up being more expensive than managing cases through a bulk exercise. Although I recognise that schemes may have a few very historic cases with little or no data - for which a reactive approach can be the only option - trustees may find that for many schemes a bulk exercise targeted at cases with readily available data, may end up being the most cost-effective way to comply with the ruling.”
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