Pensions Ombudsman allows trustees to defer equalising GMPs.
The Pensions Ombudsman (PO) has ruled that the trustees of a defined benefit scheme can defer equalising guaranteed minimum pensions (GMPs) until the government requires them to do so.
The PO dismissed the complaint against the trustees of the Campden RA Pension Scheme, which was brought by a member of the scheme who claimed that the trustees had a duty to equalise GMPs between men and women. The member maintained that the failure to do so was not in line with the scheme’s trust deed and rules and was in breach of the Equality Act 2010 as a result of failing to treat the sexes equally.
What are GMPs?
Employers were allowed to contract out of the state earnings related pension scheme (which was designed to allow individuals to accrue an earnings-related addition to the basic state pension) if they could show their pension scheme provided a pension at least as good as a statutory minimum. This minimum was the GMP and is payable from age 65 for men and age 60 for women.
GMPs ceased to accrue after 5 April 1997. Although contracting out for defined benefit schemes is due to be abolished with effect from 6 April 2016 (when the current state pension system is replaced with a flat rate single-tier pension), schemes are still liable to pay GMPs that have been earned during service between 1978 and 1997.
Equalisation of benefits
Following the Court of Justice of the European Union ruling in the Barber v Guardian Royal Exchange case in 1990, defined benefit schemes have been required to provide equal benefits to members, meaning that schemes had to ensure that their normal retirement ages were equalised.
The Barber ruling did not however extend to state benefits and therefore GMPs are not required to be equalised.
The government put forward proposals for the equalisation of GMPs in 2012, however these were heavily criticised by the industry and have therefore not been finalised. The government is currently undertaking a further review of whether and how GMPs should be equalised. Further comment was expected last spring after being delayed but this was further delayed into 2015.
The PO found the trustees’ explanation that they did not consider it an appropriate time to equalise GMP benefits to be a reasonable one. The PO was therefore satisfied that they could continue to defer taking action to equalise GMPs until the issue has been resolved.