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What Is The Difference Between GMP Rectification And GMP Equalisation?

Thursday, 3 September 2020

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

If you thought you’d already dealt with guaranteed minimum pensions (GMPs), unfortunately, you have probably only just scratched the surface.

stewart-winter Stewart Winter Operations Director, Data Solutions, EQ

You’re on your way

The coverage GMPs have had over the past couple of years have concerned a GMP equalisation case in the High Court. But equalisation is just one stage of a journey that will take in a number of projects if your scheme is affected by GMPs.

That journey may be long and tiring, and at times, you may not be sure of the direction you are heading. But it’s one that has to be made, so buckle up, there may – or may not – be a bumpy road ahead.

Reconciliation is not the end

This process all began with reconciliation, which required schemes to focus on cleaning up their data and making sure their records tallied with HMRC’s on scheme membership and GMP entitlements.

This process will have exposed gaps and thrown up discrepancies. Schemes will have examined these to a greater or lesser extent and may have decided tolerances they can accept.

After reconciliation was complete, schemes had to determine whether they needed to tell their members of any changes to their benefits and rectify their benefits.

However, the GMP equalisation process could highlight further changes and so you may prefer to wait until all the work is done before communicating with members.

All things being equal

GMP equalisation is the next step of the journey. Before starting this process, it is important that GMP records are overhauled and checked for accuracy. This is because where members are affected by both rectification and equalisation, the calculations will have to be reconciled.

Equalisation requires more data than reconciliation. This data may not be easily found within the scheme, as it includes things that were not required for the reconciliation stage.

It will need to be found or calculated. And this may demonstrate that further calculations are required.

Multiple personalities

It should not be assumed that members who had their GMPs recalculated and rectified will necessarily require their benefits to be equalised.

In all likelihood, there will be a lot of overlap between the two groups. However, reconciliation affects all members with GMP between 6 April 1978 and 5 April 1997 where scheme and HMRC records did not tally.

The only members who will be affected by equalisation are those who accrued GMP between 17 May 1990 and 5 April 1997.

Some schemes are not waiting for any further guidance and have begun their equalisation journey already.