GMP equalisation (GMPe) is complicated. We’re experts at this puzzle, we can help you.
GMPe has been a hot topic for defined benefit schemes over the last few years. We have detailed guidance, and GMPe has become a top priority for trustees and their members.
Projects are often complicated, with complex data requirements, calculations, implementation and communications. We’ve worked on over 100 GMP projects, developing our technology and knowledge so you can be confident in our tried and tested approach.
Data readiness
Equalisation calculations are complex and require many data components to ensure accuracy. Our targeted analysis identifies inaccurate or missing data essential for these calculations. With these issues addressed members can be equalised more efficiently.
Additional data requirements
In order to carry out GMPe, you’re likely to need more detailed data than is typically used for your day-to-day administration. Examples include full contracted-out earnings data to calculate GMP accrued specifically over the equalisation period 17 May 1990 to 5 April 1997. As well as the pension given up for cash lump sum solely in respect of service between 17 May 1990 and 5 April 1997.
Scheme level data
Detailed scheme level data is required including historic factors like those used for early retirement, late retirement and commutation – going all the way back to 17 May 1990, alongside information on administrative practices such as anti-franking.
Member data updates
Additional data items will need to be stored for example, additional tranches of pension in respect of service post 17 May 1990, opposite sex elements of pension.
How can ITM help?
GMP equalisation is complicated. We’re experts at this puzzle, we can help you.
Once we’ve carried out data preparation, the next step is to calculate equalised pension payments and determine which members and dependants need an adjustment to their pension using the method agreed by the trustees. These underpayments will then need to be corrected. The process broadly falls into the following steps:
How can ITM help?
Our GMPe application is built on our core data management platform – eDAaRT.
This means we can work on pensions system data irrespective of the source of that data and build core applications that are ‘system agnostic’. Our GMPe application can carry out all your GMPe calculations including the calculation of equalised benefits and rectification.
Administration systems and procedures are likely to require a significant overhaul to administer equalised benefits under any of the methods approved under the Lloyds Bank judgement.
Scheme calculation changes
You’ll need to update your systems to calculate benefits on an equalised basis (including opposite sex GMPs and the resulting excess benefits) and output the additional data items required to administer equalised benefits going forward. Many calculations will require updating, for example:
Opposite sex GMPs
These will need to be calculated alongside the corresponding excess benefit elements.
How can ITM help?
Our data consultants and GMPe application are the perfect partnership to help you prepare your data for GMP equalisation and conversion.
We’ve updated our pensions administration platform, PenScope, to manage equalisation. It can calculate equalised benefits due under any of the methods approved under the Lloyds judgement including dual payroll approaches.
If your own administration system and processes need updating, we can provide advice, independent audit and calculation of any additional data items.
Dual Payroll
The Lloyds Bank judgement approved a number of methods. Methods B and C under the judgement are often referred to as ‘dual payroll’ methods. These methods involve a year-on-year comparison of the member’s current pension elements in payment with those that would apply for the alternate sex.
GMP Conversion
The Lloyds Bank judgement made it clear that existing GMP conversion legislation could be used to equalise GMPs by converting GMPs and other pre-1997 benefits into alternative non-GMP benefits of equivalent actuarial value. This approach has the advantage of removing GMPs entirely and will be of particular interest if you have a fiduciary objective such as buyout planned.
