The Guaranteed Minimum Pension (GMP) equalisation working group, chaired by the Pension Administration Standards Association (PASA), has issued a ‘good practice’ guidance to UK pension schemes.
The new guidance highlights tax issues which schemes may encounter in adjusting benefits to correct for the inequalities of GMPs and identifies possible approaches for dealing with those issues.
Daniel Gerring, chair of the sub-group responsible for preparing the guidance, says: “Tax considerations are crucial for GMP equalisation exercises. Since the first judgment in the Lloyds Bank case established once and for all the need to equalise there has been a natural desire to get on with it. But schemes continue to be faced with difficult unresolved issues – tax often being one of the knottiest. The newsletters published by HMRC provided an important starting point and we hope this guidance will provide a further layer of support in getting things moving.”
Gerring added: “This guidance combines commentary and analysis with good practice guidance, to help enable schemes to make informed decisions. Many schemes want to implement GMP equalisation projects as soon as they reasonably can, and we hope this guidance will help the industry address tax issues in a pragmatic and proportionate way.”
The guidance draws on the experience and thought leadership of a group of advisers from various professions across the pensions industry.
In parallel, the GMP equalisation working group is preparing guidance on GMP conversion, which it expects to publish by the end of April 2021.