GMP equalisation – light at the end of the tunnel
Many people were expecting that this may never get resolved but the Government is now consulting – until 15 January – on some proposals that would provide a legislative solution to the problem of GMP equalisation (or more correctly unequal benefits arising from unequal GMPs).
The proposed solution is to compare the value of the cash flows for a member with those that would apply for a comparator (same age, service, pay, etc.) of the opposite sex, with the member then entitled to the higher of two calculations. The GMP would then be converted into "ordinary" scheme benefits. To do this current legislation which already allows GMP conversion would need to be altered.
Importantly this method would not be brought into law. The DWP are stating that this is just one way of overcoming the problem and their views do not amount to legal advice on the matter.
Schemes that have been winding up and buying out liabilities have already had to make decisions on GMP equalisation. These proposals appear to be in line with methods already adopted by many schemes but in the absence of legislative backing scheme will continue to run the risk that the method will be open top challenge.