Looks at the debate around the equalisation of GMPs and the recent High Court judgment in relation to the Lloyds Bank pension schemeJump to full report >>
When the State Earnings Related Pension Scheme (SERPS) was introduced in April 1978, it was possible to contract-out of it into an occupational pension scheme. A condition of it being used to contract-out was that the scheme provided a defined benefit (known as a GMP). The requirement to provide a GMP was removed from April 1997 but schemes still have to provide them for rights built up before that date.
The legislation (Pension Schemes Act 1993, s14 to 16) requires GMPs to be calculated on an unequal basis, with the age at which it can be drawn and rate at which benefits build up, different for men and women.
On 17 May 1990 the Court of Justice of the European Union ruled that occupational pensions were deferred pay and, as such, schemes had to treat men and women equally: “the Barber judgment.” The judgment, which applies to rights built up from 17 May 1990, imported an equal treatment rule into occupational pension scheme rules, meaning that where a scheme rule would result in a member of one sex being treated less favourably than one of the opposite sex, it must be read as though it does not do so.
The Government took the view that the Barber judgment required schemes to equalise GMPs and consulted on a proposed approach to this in 2012. However, because of concerns that this would be particularly onerous to implement, the Government withdrew the draft regulations in 2013. In 2016, it launched a further consultation on an alternative methodology, which was generally considered to be a distinct improvement.
The legal position regarding whether there was a legal requirement to equalise GMPs remained uncertain until the judgment of the High Court on 30 October 2018 in the case of Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank PLC and others. The court held that the Trustee was “under a duty to amend the Schemes in order to equalise benefits for men and women so as to alter the result which is at present produced in relation to GMPs.”
The Government said the judgement had endorsed its long-held view that schemes should equalise for the effect of inequalities in GMPs. It would make further changes to the GMP conversion legislation to facilitate the methodology on which it had consulted (HC Deb 14 February 2019 c1961).
The arrangements for increasing GMPs in payment are discussed in Library Briefing Paper CBP-4956 (May 2018).
Commons Briefing papers CBP-8427
Author: Djuna Thurley