Guaranteed Minimum Pension (GMP) is the minimum amount of pension to be paid by pension schemes that contracted out of the State Earnings Related Pension Scheme (SERPS).

In 2018, the High Court ruled that benefits arising from GMP must be equalised for men and women. This means that some members could receive an increase to their benefits in the future.

In November 2020 a further judgement was handed down from the High Court about the need to equalise for the effect of GMPs on past transfers out. This is because cash equivalent transfer values would have been calculated on unequalised figures.

Does GMP equalisation affect your employees?

Your employees may have GMP as part of your pension benefits if they were paying into the defined benefit section of the Scheme before 6 April 1997. Equalisation would apply to GMPs earned between 17 May 1990 and 5 April 1997.

If members qualify for a GMP it will be paid from their 60th birthday if they are a woman, or 65th birthday if they are a man. It is not affected by the increase in state pension age.

Although some members may see an increase to their benefits as a result of GMP equalisation, many members will not be impacted at all.

No members will have their benefits reduced.

The High Court ordered GMP equalisation to level benefits for men and women

The calculations for GMP benefits are different for men and women. This is because GMP is paid from different ages.

The ruling was passed against Lloyds Banking Group, but will apply to all Trustees of defined benefit pension schemes.

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.

What happens now?

The Trustee is taking advice and developing a timetable for carrying out GMP equalisation throughout 2021 and into 2022. The first priority is to make sure that member’s data is up-to-date and consistent with the data HMRC holds, before any GMP equalisation calculations are made.