Our update on GMP equalisation explains there is no change to how we calculate and pay benefits for most members.
In October 2018 there was an important High Court case involving the Lloyds Bank pension schemes. In that case the High Court ruled that pension schemes must adjust scheme benefits to remove gender inequalities caused by Guaranteed Minimum Pensions (GMPs) earned in the period 17 May 1990 to 5 April 1997.
What is a GMP?
This is the minimum level of pension set by the Government that we must pay members who built up benefits between 6 April 1978 and 5 April 1997, when USS was contracted-out of the Additional State Pension. The legislation contains certain differences in the treatment of GMPs between male and female members, some of which favour male members and some favour female members.
As with other occupational pension schemes, the impact of this case has been considered by the trustee and our actuarial and legal advisers. The good news is that USS Scheme Rules apply the same rates of increases to both GMP and non-GMP benefits. Together with the Additional State Pension, these rules operate to remove, or largely remove, any gender inequalities in the treatment of GMPs. Our approach is one commonly used in public service pension schemes.
What does this mean?
The vast majority of members’ benefits will not need to be adjusted. Any adjustments for those members who may still require them will be very small and we’ll now focus on these calculations. Any adjustments will be automatically applied to members benefits.
Payment of smaller pensions as a one-off lump sum (trivial commutation lump sums) are no longer suspended and can now be paid on a case-by-case basis.
Any pensions, cash lump sums, dependants’ pensions and transfers to other schemes will still be paid while we focus on the calculations for the small group who may be impacted (this could include members with GMPs transferred into USS in some specific circumstances or those with very short periods of service).
HMRC is expected to provide guidance in the coming months around various tax issues raised where GMP inequalities are addressed. However, timescales for this industry guidance are so far unclear and with another court hearing due in mid-2020 there is a lot more work to be done across the industry.
Published: 15 October 2019