There have been two recent developments following the Lloyds High Court case last year which clarified that pension schemes must address inequalities in scheme benefits due to the existence of unequal Guaranteed Minimum Pensions (GMPs).
First, HMRC has confirmed that it is setting up a working group to consider the pension tax issues arising as result of GMP equalisation and in light of the High Court decision. Also, the DWP has published its long-awaited guidance for pension scheme trustees on GMP conversion. The finalised guidance sets out a method of equalising benefits for the effects of GMPs and converting GMPs to standard scheme benefits. The proposed method, which is known as "method D2" by the court in Lloyds Bank, envisages a one-off equalisation calculation followed by conversion. The court found this was one of several lawful methods of implementing equalisation.
Both developments will be welcomed by an industry that is still far from clear about how best to deal with GMPs. However, many questions remain outstanding and we hope that the guidance will be updated by time to time as more clarity emerges on those questions.
For more information please refer to a pensions update issued in November where the Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc High case is mentined in the first line.
This article is taken from HR Law - May 2019.