Up to 1.5m scheme members are still owed backdated payments due to the equalisation of guaranteed minimum payments — and in some cases refunds could be worth up to £25,000.
This research from XPS Pensions indicates that many DB scheme members are still waiting for back payments, almost two years after the 2018 court ruling on GMP equalisation.
GMP equalisation affects almost every DB pension scheme in the UK, and the industry has estimated that five million people may be impacted.
XPS says that if the experience it has seen in cases to date is replicated across the industry then between 1.25 million and 1.5 million pensioners may still be owed some form of back payment.
XPS estimates that the top 5 per cent of pensioners that are due a refund, are owed in the region of £10,000 each. Within this group a minority will be owed up to £25,000. The average age of pensioners within this cohort is 80.
The overall impact of GMP equalisation on schemes, and the cost to employers, however remains relatively small.
For over half of schemes it is less than 1 per cent of overall liabilities. However, it can represent a significant amount for pensioners owed back payments, with the average payment due estimated at £1,000.
XPS Pensions GMP equalisation lead Vicky Mullins, says: “We are seeing a tendency to push GMP equalisation into the long grass, but this is untenable given the average age of those owed money, and the not insignificant amounts of money owed.”
She points out that there has been plethora of guidance over the last two years from the Government and industry bodies, which has given schemes a clear way forward to manage the process.
“There is no reason why pension schemes cannot move forwards with GMP equalisation now. It is not as complicated as it first appears if you avoid getting bogged down in data. It is incredibly important that members receive the money they are entitled to, particularly at this difficult economic time where older pensioners may have significant need for income.”