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Supporting clients to equalise pensions

GAD has devised a modeller to support clients as they seek to equalise pensions for scheme members. It provides bespoke solutions according to clients’ needs.

Experts at the Government Actuary’s Department (GAD) have been supporting clients as they work towards fully equalising pensions for their members. We have devised a modeller to assist in the process.

Legal rulings

The issue of guaranteed minimum pension (GMP) equalisation dates to May 1990 when the Barber judgment ruled on the matter. This applies to pensions including GMP accrued between 17 May 1990 and 5 April 1997.

The 2018 legal case in Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank PLC and others, provided clarity and confirmed equalisation was needed. The judgment means that no member can be worse off compared to someone of the opposite sex.

Many pension schemes are still working towards equalisation. GAD has been helping several of its clients make good progress towards equalising benefits for pension scheme members.


Pension schemes which contracted out of the State Earnings Related Pension Scheme (SERPS) prior to April 2016 have to provide a GMP for their members for service between 1978 and 1997. These form part of the overall benefits that schemes must provide.

The rules relating to GMPs are complicated with GMPs being different for men and women, in particular: GMPs are payable from age 60 for women and age 65 for men. Therefore, equalising for GMPs will mean that for some members benefits will need to be uplifted. This will be at extra cost to the pension scheme.

GAD’s solution

GAD has devised a modeller to assess the individual member impact of equalising GMPs and associated costs of addressing the inequalities. This has helped:

  • determine the adjustments required to equalise individual pension amounts, and understand the range of outcomes
  • produce estimates of the additional liabilities to be included in funding assessments – either in regular actuarial valuations or accounting disclosures
  • trustees and employers decide on the choice of method to be adopted to equalise pensions
  • inform the way that pension scheme administrators can most effectively approach the project work, including actions to address any historic data gaps

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As the circumstances for each scheme will differ, GAD’s modeller allows us to provide bespoke GMP equalisation solutions according to clients’ needs.

For a particular client, we have now completed this complex exercise which enabled them to move to buy-out and progress on their winding-up path.

This was a complex project for the trustees and their advisers, as it was one of the first schemes to tackle GMP equalisation following the Lloyd’s judgment. GAD advised the trustees on calculating compensations which were due to current members before their benefits could be bought out.

Understand the impact

Actuary Mark Shaw who has been leading on the project said:

“Our modeller is an important addition to our work helping pension schemes understand their potential costs when it comes to GMP equalisation.

“It’s specific to each scheme, supporting with the full range of historic benefit remedying, including GMP rectification and equalisation.

“We understand every scheme is different and GAD has worked closely with clients who are addressing these issues. The modeller helps clients understand the impact of what this will mean now and to get equalisation done. If you would like GAD’s help with GMP equalisation or modelling pension scheme costs, then contact your usual GAD adviser.”


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