Government sets precedent on GMP equalisation

Posted on Feb 02, 2010

Pensions Minister Angela Eagle has made a statement to the House of Commons regarding the equalisation of Guaranteed Minimum Pensions (GMPs). Whilst the statement was made in the context of the Financial Assistance Scheme (FAS), it has implications for all schemes with GMPs.

GMPs are the contracted-out element which must be provided by defined benefit schemes contracted-out between 1978 and 1997. It has been unclear for a long time whether, and if so how, GMPs should be equalised.

The Government has stated its intention to introduce legislation requiring GMP equalisation, and whilst it is not clear whether this will apply to all schemes and not just FAS schemes, all involved with pension schemes need to be aware that GMP liabilities seem likely to increase.