Guaranteed minimum pension (GMP) rectification

Your reconciliation exercise focussed on ensuring your records were aligned with HMRC’s on GMP entitlement and scheme membership. You may have investigated discrepancies and considered acceptable tolerances. By now, you’re likely to have a good understanding of the scheme members affected and the level of under and over payments due.

It’s important to ensure your GMP records are accurate before embarking on GMP equalisation. Where members are impacted by both GMP rectification and equalisation – calculations will need to be based on reconciled values.

Any errors identified in member benefits as part of your GMP reconciliation must be rectified as soon as reasonably possible. Any period where an error is left uncorrected could adversely affect members, particularly where the pension is in payment and the error is compounded.

For the majority of schemes, there’s no reason to hold off rectifying most members’ pensions. However, some schemes are hesitant, particularly where members may be impacted by GMP equalisation too.

Some schemes are concerned that adjusting member benefits for rectification and then adjusting them again for equalisation is over-complicated, difficult to communicate and would be easier to combine with equalisation in the same project.

If you’re considering when to rectify, think about:

• Whether members have been overpaid or underpaid
• How many members may also be affected by equalisation
• When an equalisation adjustment is likely to happen
• Whether the equalisation adjustment would be materially significant

In our experience we’ve found that for most members, rectifying prior to equalisation is beneficial.