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Achieving The Impossible: Creating The Technology To Address Equalisation Issues Early

07 September 2018

Problem

How to enable companies to take the right action as soon as the GMP equalisation decision is made

A High Court judgement later this year is expected to solve the complex issue of if, and how, to address the equalisation of Guaranteed Minimum Pensions (GMPs). After 30 years of uncertainty, affected companies will need to spring into action. 

Members will want to know what it means for them. Investors and shareholders will ask questions about the financial impact on the business. Trustees will need to work to meet their responsibility to pay the right people, the right amount, at the right time.

But, there are a number of possible outcomes, so deciding what to do and how to update stakeholders is not a simple task, requiring time and access to quality data. Until now, it had been thought within the industry that it was impossible to model all these different outcomes. 

Solution

Create an innovative tool to model scenarios 

Equiniti has overcome these industry concerns to develop a comprehensive tool that makes it possible for companies to be equalisation ready. 

The tool reveals the number of people that could be affected in a business and produces the data needed for an actuary to work out how much it would cost to equalise GMPs. It can do this based on a number of different situations, for instance the method of equalising that the court case concludes is the most acceptable. 

And it works. It’s already been tried and tested by both multinationals and the Pensions Protection Fund (PPF).

Result

In-depth knowledge of the potential impact and company confidence in the way ahead

The first company Equiniti used the tool with was a leading drinks manufacturer. As a result of the data that the tool produced, the company is not only ready for any changes, but it now knows that the impact to the business is not as great as feared. The project has revealed that the proportion of members affected is actually relatively small. As a result of taking this proactive action, the company and its trustees are confident their plans ensure there will be little to no impact on the wider business.

Stewart Winter, Operations Director - Data Solutions at Equiniti, believes the drinks brand took a sensible approach to addressing this risk: “Other companies are now starting to realise that if the decision is that we need to equalise, correcting it is the next big thing in the pensions world. It makes complete sense to undertake this analysis now, well before a time period is imposed and the pressure is really on. Get yourself all the information you need and have the benefit of time to fully consider all the options.”

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