Advisers have called on the government to provide urgent clarification on equalising guaranteed minimum pensions in order to address concerns by trustees and sponsoring companies.
HMRC has recently published guidance about this issue, but only regarding one proposed method of equalisation.
Mercer says that this recent guidance falls short of addressing all areas required for scheme trustees and sponsors to make fully informed decisions.
In a budget submission to the government, Mercer has called on HMRC and the pensions minister to take urgent steps to clarify – and if required, amend – the law so that trustees are provided with the necessary information to allow them to pay pension scheme members their correct benefits.
It points out that this recent guidance does not cover GMP conversion, nor allude to when it will address this issue. This leaves scheme trustees and sponsors in a difficult position because HMRC has not fully defined some of the options theoretically available for equalising GMP.”
Mercer senior partner and chair of its GMP equalisation steering committee Adrian Hartshorn says: We have a once in a lifetime opportunity to make a real difference to the way pension schemes operate in the UK. Over the last 40 years, layer upon layer of complexity has been added to the way in which pension benefits are calculated and administered.
“As we implement GMP equalisation, we have an opportunity to simultaneously simplify benefits. This will help members understand their benefits, speed up processing times and reduce administration costs.
“This could reduce the additional costs of administering more complex benefits by £200m over the lifetime of pension scheme, ultimately putting members in a better position.
Fifteen months after the High Court judgment and almost 30 years after the original sex discrimination case there is still a lack of guidance from HMRC, which in turn prevents schemes from fully making fully informed decisions.”