GMP Equalisation Past Transfer Value Increases

On Friday 20^th November 2020, the High Court ruled that defined benefit company pension schemes must revisit all pension transfers out to other pension schemes to work out whether the pension scheme did not offer a high enough transfer and therefore issue a further pension transfer top up.

This is to do with Contracted Out of SERPS defined benefit schemes where the pensions scheme matched the SERPS guarantee with a Guaranteed Minimum Pension (GMP).  The issue being that many transfers out including GMP were not equalised for retirement ages for both men and women.  This goes back many years where state pension ages differed e.g.  60 for women and 65 for men meaning that the transfer value offered to men and women were different.

What is Pensions Equalisation?

Barber v GRE (1990) was the original ruling that company pension schemes for men and women must be equalised with the same retirement age.  This meant that all company pensions were forced to equalise pension ages.

GMP a problem?  The State Earnings Related Pension Scheme (SERPS) was a 2^nd tier of government state pension.  We all accrue the State Pension but a 2^nd tier state pension (SERPS) could either be accrued within the State system or companies could ‘contract you out of SERPS and build these rights up inside your company pension.  The issue here was State Pensions Age Equalisation was not made law until 1995 and was then phased in to raise pension age for all women to 65 by 2018 and then both men and women raised to 66 and then 67.  As GMP matched state pension ages it meant whilst companies had to equalise normal pension rights earlier, they did not have to equalise GMP benefits inside the pension until more recently. 

2018 - GMP equalised ages too.   It was not until a High Court Ruling on a Lloyds Bank Pension Scheme test case on 26 October 2018 that all GMP elements must be equalised too.  That said, there was still an issue about back dating the rights to a correct transfer value.  In short, many people may have been offered an incorrect transfer value as the GMP part of the your pension had not been equalised to reflect equality in the state pension ages.  That said, most pension schemes held back on making the changes as they hoped that the requirement to equalise all would not be backdated and waited for the final appeal.

2020 – A further High Court ruling on 20 November 2020 has ordered that all pension schemes must now back date and recalculate all transfer values with full equalisation of both normal pension rights and contracted out GMP rights included. 

This means that some people would have been/will be entitled to a higher transfer value and if this has already been transferred, they will receive an additional transfer value top-up.  This should be paid directly from your old company pension scheme to the scheme that received your transfer.  This may take many years to complete as there will be hundreds of thousands of calculations to be done.

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