Nov 10, 2018 A Financial Times Article written by Josephine Cumbo highlights the trustees of some UK pension schemes may have another reason to put transfer activity on hold while they digest a landmark High Court ruling that banned men and women’s pensions from being treated differently.
Most, if not all, of the UK Defined Benefit/Final Salary pension schemes that were offered between 1990 and 1997 may now need to adjust their current factors for calculating GMPs (guaranteed minimum pensions) in order to equalise the treatment of men and women.
The recent High Court ruling in the UK found in favor of three female members of the Lloyds Banking Groups pension scheme, who argued that gender discrimination had taken place because their pensions rose each year at a slower rate than those of men.
Since the ruling, some trustees have frozen the flow of six-figure lump sums out of the pension schemes and Chantal Thompson, partner with Baker & McKenzie law firm was quoted as saying ” we understand that one firms is saying that trustees should not proceed with transfers until benefits have been equalised, albeit that there is likely to be a considerable amount of work required to equalise all GMPs under a scheme”.
Depending on scheme rules and the member’s service during the period between 1990 and 1997, it may or may not have a significant impact on the transferring member’s benefits
Hymans Robertson, a scheme administrator, said that in addition to delaying transfers, some schemes had also suspended the payment of smaller cash lump sums in the wake of the ruling, whilst other schemes were allowing transfers to continue.
Charles Cowling, chief actuary with JLT Employee Benefits says ” Our current view is that we should continue paying transfer values on a ‘business as usual’ basis – recognising that top-ups may be necessary at a later date once GMP equalisation is sorted”. As such, if you are a man with a UK final salary pension scheme and were considering a transfer, now might be a good time to move forward as the GMP equalisation might occur at a later date for your scheme.
The Department for Work and Pensions said it would be issuing guidance on its suggested methodology for implementing GMP equalisation “shortly”. This guidance will reflect the recent High Court ruling said the DWP.
The Pensions Regulator said it was for trustees to decide “what, if any, action was needed for their scheme to provide equal pensions following the recent judgment”.
If you have a UK pension transfer in progress, the trustees of your scheme would contact you (or your QROPS adviser) in due course once deciding whether of not this will impact their current transfers or not – there little point calling the UK schemes at this time whilst they are figuring out how to respond to this new decision.
If you would like specialist QROPS advice on your particular UK pension situation, please call Sterling Planners on 1300 132 737.