GMP reconciliation and the need to equalise for the effects of GMP inequalities both remain hot topics in the pensions industry with many questions remaining unanswered.
GMP equalisation: the current picture
The second part of the Lloyds Banking Group court case began on 4 May 2020, focusing on members that have transferred their benefits. The Court is to consider who is responsible for paying the equalised benefits: the scheme from which the pension originated or the receiving scheme.
The argument put to the High Court by Lloyds is that the trustee does not need to address historic transfers. This is based on the Coloroll judgment of the 1990s which ruled that the obligation for equalised benefits lies with the receiving scheme. However, the Department for Work and Pensions (DWP) disagree. The DWP argues that if the transferring scheme has miscalculated the transfer value, they have a statutory obligation to correct the transfer calculation.
If the court agrees with the DWP, trustees will be required to assess whether former members that transferred out are eligible for additional benefits. In many cases the cost of such an exercise is expected to outweigh any benefit increase to the member. The judgement of the case will be eagerly anticipated by many.
HMRC GMP checker
In its Countdown Bulletin 53, HMRC has confirmed that it plans to issue the final data cuts to those schemes that used the Scheme Reconciliation Service or have been reconciled as part of the Scheme Cessation process, by the end of July 2020.
HMRC has admitted that the GMP data that will be provided is a lift from their system at a point in time after which updates may still have been carried out. In contrast, the online GMP checker provides a real time GMP value calculated at the point of request using current information, and so there may be discrepancies between the two data sets. The online checker provides accurate information and the figures are specific to the date input for the GMP calculation.
Scheme administrators are being advised to check the GMP amounts provided against their records and where there are differences this should be verified using the online checker service. If the data cannot be agreed, then this can be queried with HMRC at a life event.
Our comment
The discrepancy of data being provided by HMRC may add to what has already been a long process for schemes to reconcile GMPs. The potential differences in the final data cut may mean that trustees and administrators have to review the GMPs once more before accepting the final data. Schemes that have already reconciled members, and either have or have not yet applied rectification, may also wish to carry out a final analysis of their data.
Although further checks may be required once the data is received from HMRC, this should be the final item outstanding before they can proceed with completing rectification or other projects that may have been put on hold whilst the GMP issues were resolved.