In a case involving the Lloyds Bank pension schemes, the High Court ruled that pension schemes must adjust benefits to remove the gender inequalities caused by Guaranteed Minimum Pensions (GMPs).

In a case involving the Lloyds Bank pension schemes, the High Court ruled that pension schemes must adjust benefits to remove the gender inequalities caused by Guaranteed Minimum Pensions (GMPs).  The Trustee is working closely with its advisers and the employers to monitor further developments so it can properly assess the implications for members and identify any action that may be required.  Working out what the equalisation adjustments (if any) might be is a complex process and could take many months and even years to complete.  Where members are affected, any required increase to benefits is likely to be relatively small.   Members affected will be notified if adjustments apply to them.

It is expected that the Department of Work and Pensions will provide guidance to pension schemes as to how they can equalise benefits for the effect of inequalities caused by GMPs and additional policy input is expected from HMRC about the tax implications arising from changes to benefits already in payment. The Pensions Regulator is also expected to issue guidance to schemes about the practical issues involved in the equalisation process.

This issue is being taken very seriously by the Trustee and the Scheme sponsors and will be dealt with as soon as reasonably practicable.  Some more detail is provided below. 

From 6 April 1978, individuals could accrue an entitlement to an earnings-related addition to their basic state pension, through the State Earnings Related Pension Scheme (SERPS). In return for lower National Insurance contributions, an employer could contract its scheme out of SERPS if it provided a pension at least as good as a statutory minimum, known as the Guaranteed Minimum Pension (GMP). The equalisation required under the Lloyds judgment would apply in respect of benefits earned after 17 May 1990 so it only affects members with contracted-out service in the period 17 May 1990 to 5 April 1997.

Although steps have been taken by Government to equalise State pension ages, the Government decided not to increase the age at which GMPs are paid to females.  The relevant legislation still provides that GMPs are paid to females from age 60 and males from age 65.  There are also several differences in the calculation and treatment of GMPs between male and female members, all of which are set out in legislation.  These include the fact that typically GMPs built up more quickly for females, and different rates of increase apply to GMP and non-GMP pension during the period after the member leaves a scheme up to the date the GMP comes into payment.  Some of the differences favour male members and some favour female members.