On 28 January 2010, Pensions Minister Angela Eagle made a statement about the equalisation of guaranteed minimum pensions (GMPs) in relation to the Financial Assistance Scheme, reaffirming the Government’s intention to implement new provisions to reflect European law and to remove any inequality in scheme rules that results from the current GMP legislation. GMPs are the contracted-out element which must be provided by occupational defined benefit schemes which were contracted out of SERPS between 1978 and 1997. The equalisation issue arose as a result of the Barber case in 1990 which held that scheme rules must provide equal benefits for men and women where more favourable treatment had been received by an individual of the opposite sex in comparable work.
Eagle stated: “In the meantime, it is the Government’s opinion that to ensure full compliance with European law, trustees…should act as if existing domestic legislation requires equalisation in respect of differences resulting from GMPs, whether or not real comparators exist.”
Comment: This development has been generally considered unwelcome and is seen as added financial pressure on schemes which have GMPs at an already difficult time. Although the statement was made in the context of the Financial Assistance Scheme, we understand that the Department for Work and Pensions has confirmed that any legislative changes will apply to all schemes. If the Government presses ahead with the proposed legislation, it is hoped that they will also provide some practical guidance for trustees and employers in implementing what has been regarded for the past 20 years as an almost impossible aspect of the equalisation requirements. However, as equal pay claims under Article 141 of the EC Treaty require an actual comparator, this requirement will be difficult to ignore.