GMP

14th October 2019

The futures bright, but it’s a way off being GMP free. Lots of schemes are focussed on equalisation, but for some, reconciliation is still not complete. Ultimately, reconciliation of both the scheme membership and the level of GMP entitlement for each member is essential before benefits can be correctly equalised.

 

So, why’s it taking so long…? As with everything GMP there isn’t a single, easy answer.  But layers and complexities…

 

In the run up to the HMRC cut-off date to raise queries (Dec 2018) the whole industry scrambled to submit many thousands of cases. That influx lead to a significant backlog of work for HMRC and as a result replies were only received in June this year.  A fair chunk of cases are now resolved. But many thousands of these replies are now being analysed to understand if they have been resolved (reconciled) or now need to be referred to trustees for a decision. If HMRC were consistent in how they detailed replies then all our lives would be so much easier – but of course they are not and you can’t automate everything.

 

Added to this is the final cut of data HMRC are due to provide in November. This will be generated using current data and will represent the final GMP liabilities following all the reconciliation work. In theory the analysis should look very similar to the original Stage 1 reports produced all those years ago – but with (you’d hope) significantly better results.

 

A new report may also generate new issues; during the course of reconciliation active members will have retired, pensioners will have died with or without spouses. These are all events that commonly trigger new GMP figures.

 

New GMP figures may also be generated in circumstances where a deferred member had the exact same GMP as HMRC at date of exit but has now reached GMP Age so now has a figure different to HMRC or has no GMP at all. Similarly, a pensioner who also had a current GMP but has since died so now needs the spouse GMP checked.

 

Further complexities will come as a result of reconciliation work completed by another party. E.g. Scheme A thinks 300 members should actually sit with Scheme B – so put through a bulk action late in 2018. As there is no easy way for Scheme B to both pick up this action nor challenge it. These “new” members won’t be seen until this final HMRC extract is provided.

 

It’s difficult to stress enough the importance of accurate reconciliation. There is definitely an argument that suggests a fresh extract of administration data to identify these issues (with equalisation in mind) is necessary. This also provides an opportunity to check that any previously agreed actions have now landed in the administration software as expected.

 

All this work has prompted payments and refunds to discharge or reinstate GMP liabilities. This is generally for members who left and took refunds. Over the years refund rules have changed and these payments can date back to 1978 so as you might expect availability and quality of data is variable. This makes finalising the financial position for schemes complicated.

 

I think we are all very ready to draw a line under reconciliation and this final cut feels like the right trigger to draw that line.

 

It’s fair to say for many schemes there is still work to do before we can declare GMPs fully reconciled. Whilst doing that work and planning rectification schemes can consider how best align to their GMP equalisation project. You can create efficiencies in both data work and member communications by dovetailing future work.

 

As the GMP journey continues, don’t cheat by starting to read Chapter two (The Rise of Equalisation) before finishing Chapter One – (A Long Road Ahead)!

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