Guaranteed Minimum Pensions (GMPs) have been a complication of UK pensions for as long as most of us can remember. However, after a long and complex history, their end is perhaps in sight. There’s still work to be done, but we can now start thinking about waving them a fond goodbye.
We are still awaiting clarity on just what, if anything, must be done about the inequality between the GMP entitlements of men and women. The UK Government’s view continues to be that equalising for the effect of GMPs between men and women is required. However, the government has only proposed a method for equalisation, which includes, as a final step, converting GMPs into a potentially different form of pension.
Many pension schemes have used these developments to begin their own GMP journey. Where this will take them will vary by scheme, but the end of this journey could be a pension scheme without any GMPs. In practice, this could mean the following for UK pension schemes: Simpler ongoing administration – with easier calculations and more coherent pension benefits (no more complicated step-ups).
- A pension that members understand – allowing member communications to focus on the bigger picture of their retirement options
- A pension that members understand – allowing member communications to focus on the bigger picture of their retirement options
- A more efficient investment strategy – it will be easier to match a scheme’s liabilities more closely
We can guide you through the different steps on this journey and the four main stops en-route to the end destination:
- GMP reconciliation – making sure that scheme GMP and membership data is the same as that held by HMRC. Traditionally completed when a member reached their GMP payment age, but now brought forward to avoid problems that might come to the fore when HMRC’s Scheme Reconciliation Service (SRS) is removed.
- GMP rectification – recalculating pensions and implementing adjustments for any members where you have accepted a change in data through the SRS.
- GMP equalisation – if this proves necessary, uplifting some members’ benefits to equalise for the effects of GMP.
- GMP conversion – the process of converting GMPs into other benefits offers opportunities to simplify and streamline pensions.
