The UK’s Pensions Administration Standards Association (PASA) is forming a new industry group to help pension plans abide by the High Court’s landmark ruling on the equalization of guaranteed minimum pensions (GMPs).
In October, the UK’s High Court ruled that Lloyds Banking Group’s pension plans must equalize GMPs for men and women. The court said pensions provided to members who had contracted out of their plan must be recalculated to ensure payments reflect the equalization of normal retirement ages in the 1990s. Experts estimated that the ruling could cost providers £10 billion ($12.9 billion) to £20 billion in payouts.
The ruling also means that thousands of defined benefit pension plans will have to amend their rules and equalize GMPs between men and women. However, the court did not establish a method for equalization, and said that multiple methods are available.
“We recognize the value that best practice guidance on GMP equalization will provide,” said Geraldine Brassett, a PASA board member who will chair the new group. “GMP equalization projects are likely to be complex, so it is important that advisers, administrators, trustees, and employers work collaboratively to ensure cost-effective delivery and clarity for scheme members impacted.”
The group will be made up of representatives from across the industry, including from the May administration, as well as from the legal, advisory, actuarial, data, and trustee sectors. It is tasked with developing and promoting best practices on issues arising from the ruling, including how to address missing data, and how to deal with transfer requests and rectifying underpayments.
PASA was formed in 2011 as a not-for-profit organization to promote and improve the quality of pension administration services for UK pension plans.
“Delivering GMP equalization will be challenging and we welcome this initiative to bring clarity to the market,” David Fairs, The Pension Regulator’s executive director of regulatory policy, said in a release. “It will take some time to work through all the issues. Establishing best practice will help [the] industry do this as efficiently as possible, and minimize disruption to routine scheme business.”
Tags: Guaranteed Minimum Pensions, Pensions Administration Standards Association, UK