There are two new developments relating to the equalisation of the “guaranteed minimum pensions” (“GMPs”) which men and women built up in contracted-out pension schemes between 17 May 1990 (the date from which schemes are required to “equalise”) and 5 April 1997 (when GMPs stopped accruing).
First, the PPF has published a document explaining how it means to address GMP equalisation when it calculates compensation for members whose schemes have fallen into the PPF. Its chosen method treats the equalised GMP as an underpin to a member’s overall benefit (while recognising that the GMP may have to be paid at a different time from the member’s other benefits). But it falls short of subdividing male and female pensions into separate GMP and non-GMP components and saying that both components must be provided on whichever of the male and female basis is more generous.
The PPF is not expecting schemes to reflect its approach to GMP equalisation in their next s179 valuations, although that position will be reviewed shortly.
In addition, the Government has announced that it intends to issue, apparently “around Easter”, draft legislation which may require occupational pension schemes to equalise GMPs. (The PPF has a statutory duty to equalise GMPs, but the law is not currently clear as to whether contracted-out occupational pension schemes must do so). It remains to be seen whether the draft legislation will provide in detail for the approach schemes should follow, but if any detail is provided it now seems likely that it would adopt an underpin approach similar to the PPF’s.