The DWP's new proposal for a method to equalise GMPs is more pragmatic and administratively simpler than its first suggestion in 2012.

It involves a one-off calculation of actuarial value and would lead a pension unfettered by contracting-out legislation.

There are two steps:

  • In relation to the period between the Barber decision in 1990 and the end of GMP accrual in 1997, the method would compare the value of expected future cash flows for a member with that for a comparator of the other sex, allowing for contingent benefits. The member would receive benefits to the higher of these two values.
  • The GMP would be turned into ordinary scheme benefits under an amended version of the legislation that already allows GMP conversion. The DWP suggests that the whole GMP would probably be converted (because of the simplification it offers), as might the non GMP element of a pension.

The new proposal is out for public consultation until 15 January. It has been prepared with the help of a working group of experienced industry figures.

There is a detailed technical statement of a "ten-stage possible process".

The DWP acknowledges a range of technical issues it has yet to address, like the treatment of pensions in payment and some pensions tax questions.

It plans to issue Guidance to clarify the process once the legislation has been amended.

Status

If it goes ahead, the method will not be written into legislation. The DWP makes clear it is not the only way to equalise; it is merely a possible approach a scheme seeking to equalise might adopt. The DWP also points out its views do not amount to legal advice.

If the proposal goes ahead, schemes that adopt it would be taking some degree of risk at least.

The government holds to the view (that it attributes to its predecessors too) that schemes are required to equalise GMPs as a result of EU law. In relation to Brexit, it adds that the government will continue to apply EU law while the UK remains a member of the EU.

Abolition

Alongside a consultation on equalisation, the DWP is seeking views on adjustments to some of the regulations on the abolition of contracting-out in April. At the time it accepted there were snags with aspects of the legislation.