Back to news 21 November 2018
GMP equalisation and RPF
A recent High Court decision is likely to have an impact on many benefits payable from RPF.
The Court judgement (in relation to the Lloyds Bank pension arrangements) confirmed that pension benefits between male and female members should be equalised to address the fact that Guaranteed Minimum Pensions (GMPs) are calculated differently according to the sex of the member. GMPs are provided by pension schemes as an alternative to the State Earnings Related Pension Scheme (SERPS) if the scheme in question decided many years ago to “contract-out” of SERPS. Many UK pension schemes (including RPF) did contract-out in this manner.
The element of the GMP which triggers the requirement for equalisation under the Lloyds Bank judgement is the part earned by service between 17 May 1990 (the date of an earlier court case requiring equal treatment) and 5 April 1997 (when GMPs ceased to accrue).
Many members of the Fund will have earned GMPs during this period. If you did, you may be due a top-up to your pension (although this is likely to be fairly modest in amount).
The judgement in the Lloyds Bank case may become subject to appeal, and there are a number of aspects of the case which pension schemes across the UK will need to spend some time considering in order to ensure that equalisation is properly carried out. But if the judgement is confirmed, it will be necessary to make appropriate adjustments to members’ benefits to reflect the requirements of equalisation. If any adjustments are required to your own benefits, these will result in increases to your benefit. But as the process to adopt the correct method of adjustment, and then implement this approach across the Fund, will be complex and time-consuming, it will be many months before these adjustments can be made. We will write to you once we are in a position to confirm how your benefits may be affected.
In the meantime, the Trustees will continue to administer the Fund on the basis of your current, unadjusted GMP entitlement. If you are thinking of requesting a transfer value from the Fund, you should give particular thought to this situation. Your transfer value quotation would be based on your unadjusted GMP entitlement, and so if you transferred out on this basis there might need to be a further top-up payment in the future to reflect any subsequent GMP adjustment.
If you are considering a transfer, you may therefore wish to wait until the future adjustment has been made in order to ensure that your transfer value fully reflects the value of your adjusted entitlements. Alternatively, if you prefer to move ahead with the transfer of your benefits on an unadjusted basis, you can do so. However, you should inform your receiving scheme that there may be a further top-up payment which may be payable in the future, and you should seek their confirmation that they would be able to accept it. If not, the Trustees will need to consider at that stage whether there are alternative methods of providing this top-up.
In the meantime, it’s business as usual for the Fund. Benefits will continue to be paid in the normal way, and we will let you know in good time once we have certainty on the adjustments to benefit that need to be made.