On 26 October 2018, the long awaited High Court ruling was released on Guaranteed Minimum Pension (GMP) equalisation for the Lloyds Banking Group’s pension schemes.
 
The ruling was that the schemes must address the effect of inequalities caused by GMPs and ensure benefits are equalised to reflect their impact. Although the judgment relates to the Lloyds Banking Group, it also creates a precedent for other formerly contracted-out defined benefit (DB) schemes.
 
The Trustee has started to receive advice from its advisers on how to deal with GMP equalisation in the RPS and the BTPFSF and will communicate how it proposes to deal with this issue as soon as it can.
 
As background to the issue of GMP equalisation, inequalities arise as GMPs accrued at different rates for men and women, are payable from age 60 for women and age 65 for men and are increased in different ways to non-GMP.
 
The judge found that the trustee of the Lloyds Banking Group schemes “is under a duty to amend the Schemes in order to equalise benefits for men and women, so as to alter the result which is at present produced in relation to GMPs”. The requirement applies to GMP accrued between the date of the Barber judgment (17 May 1990) and 5 April 1997.
 
The Lloyds judgment will have a significant and/or wide-ranging impact on most DB pension schemes in the UK.
 
DB schemes that were contracted-out between 17 May 1990 and 5 April 1997 will most likely have to carry out a GMP equalisation exercise.
 
This will be typically be a complex undertaking which is linked to GMP reconciliation and rectification work that is already ongoing. Consequently, GMP equalisation projects will generally take a significant time to complete.
 
The impact on the railways pension schemes may be lower than for some schemes as a consequence of the approach adopted for revaluing GMPs for leavers and the application of non-GMP pension increases for women until age 65.