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GMP Equalisation Scheme

Do I Have To Run GMP Equalisation On My Whole Scheme At Once?

Thursday, 19 November 2020

By Stewart Winter, Operations Director, Data Solutions, EQ (Equiniti)

It is often said that no two pension schemes are the same. Though a cliché, it is true that every scheme is just a little bit different and needs to be treated as such.

Stewart Winter Stewart Winter Operations Director, Data Solutions, EQ

Even two schemes with an identical structure can be like chalk and cheese; separated by different sponsors and funding requirements, memberships, industries, strategies, the list goes on.

As a result, different schemes will take different approaches. And how one scheme tackles their Guaranteed Minimum Pension (GMP) liabilities will feel quite normal to some, while others will consider it quite bizarre. You will have to find your own path.

Break it down

You do not need to do it all at once. The scheme can break the liabilities up into sections and deal with each in turn. Those groups may be actives, deferred and pensioners, thereby leaving the hardest to last. But as pensioners will already have pensions in payment, they represent the most difficult to unpick.

A moral dilemma

The trustees may determine that out of fairness, pensioners should be tackled first, because the scheme will be paying some people the wrong benefits. There is an argument that if payments have been wrong for a decade or more, what difference will a few more months make? Members who qualify will see little change to their benefits, but they do represent the low hanging fruit. Many will see addressing pensioners first as the right thing to do, morally, at least.

Other factors to consider

But the choice is down to the scheme and will hinge on several factors. They include – but are not restricted to – data quality, the future strategy - and position on the road to the endgame-  which will inform which members are targeted first.

If a buy-in or buyout is being considered, pensioners will be the priority. If undertaking pension income exchange or other type of de-risking exercise, actives and/or deferred members may be the ones to deal with first.

One thing is clear

Unfortunately, there are no fixed solutions for GMP equalisation. You are going to have to find your own path. 

However, that is not as frightening as it was once as the Lloyds case in the High Court has clarified several issues for schemes and their advisers. What matters most is that trustees do have a responsibility to deal with GMP equalisation. That is now set in stone.

So, if your scheme has yet to begin the process, there is no longer any doubt that it will have to be done. And that has been the case for two years, already. Completing the preliminary work will increase your scheme’s understanding of this new stage of the project. It is highly likely your strategy to deal with it will be informed by those insights.


If all key stakeholders pull together as one, the project will be better managed and effectively prevent the delays and additional costs so many schemes fear.

Good luck on your journey.