GMP equalisation
-Lloyds Bank decision 3 (76)
by
Roderick Ramage, solicitor, www.law-office.co.uk
(first
published by distribution to professional contacts 1 January 2021)
DISCLAIMER
This article is not advice to any
person and may not be taken as a definitive statement of the law in general or
in any particular case. The author does
not accept any responsibility for anything that any person does or does not do
as a result of reading it.
the 2018 decisions
1
The first decision, [2018]
EWHC 2839 (Ch), handed down on 26 October 2018, was that pension benefits
payable under the bank’s pension schemes including GMPs are pay, the unequal
treatment of members resulting from unequal treatment of male and female
members under the GMP legislation was sex discrimination, and therefore the
total benefits must be equalised. A supplementary decision ([2018] EWHC 3343
(Ch)), about the form of the order in the first decision was handed down on 6
December 2018.
2
In one of my pension
law updates for New Year 2019, I concluded that, for many pension scheme
trustees and employers, the conversion of GMPs to scheme benefits under method D2 in the
first decision will be the most attractive way to deal with equalising GMPs.
the 2020 decision
3
The decision in Lloyds Banking Group Pensions Trustees Ltd v Lloyds
Bank Plc [2020] EWHC 3135 (Ch), handed down on 20 November 2020,
deals with the liability of the trustees to make good shortfalls in the amounts
of transfer values which included unequalised GMPs.
4
The effect of this
decision is that trustees
of contracted-out defined benefit occupational pension schemes are in breach of
duty and liable to make top-up payments, if they had made payments in respect
of members, who had transferred to another scheme, which were inadequate because
benefits including GMPs has not been equalised.
Trustees should be pro-active to perform their duty to make tup-up
payments and do not require a court order to do so.
5
This duty does not
apply to all transfers.
(a) Inadequate transfers under the cash equivalent provisions of
the Pension Schemes Act 1993 must be compensated.
(b) Inadequate transfers made in compliance with the Occupational Pension Schemes (Preservation
of Benefit) Regulations 1991 reg 12 need not be compensated.
(c) Inadequate transfers made under a power conferred by the
scheme’s rules and with the preservation of benefit legislation need not be compensated.
Members n categories (b) and (c) wishing to
claim compensation claiming would have to seek to have the transfers set aside.
6
Trustees are not
discharged from their duty by the length of time since the breach occurred, any
discharge forms signed by members or by any duty of a receiving scheme to
equalise benefits.
notes and details
7
Para 3 to 6 are a scant summary of the judge’s
own summary of a judgment of more than 100 pages (over 400 paragraphs), in the course of which, in response to questions and problems
raised in argument, the judge said this.
276 In these circumstances, all
that I can usefully say is that the Trustee does need to be proactive in that
it must consider the rights and obligations which I have identified, the
remedies available to members and the absence of a time bar and then determine
what to do”.
The following points, some perhaps obvious,
might, I hope, be a starting point for trustees and employers planning what to
do pending the publication of the minute of order implementing the judgment.
(a)
GMPs accrued from 17 May 1990 to 5 April 1997.
(b) The payment of a pension is not a transfer but a benefit to
be equalised in accordance with the 2018 decision.
(c) Identify all members in the three categories (a), (b) and
(c) in para 5 above and gather all available information (including information
about GMPs transferred in) about them and the transferee schemes and their contact
details.
(d) Assume in respect of members in category (a) that the requirement
for trustees to be proactive includes a requirement to discharge the liability
to make top-up payments.
(e) Consider deferring any decisions about members in categories
(b) and (c) until claims if any are made by former members or transferee schemes.
(f) Make broad brush estimates of amounts of the top-up payment, being the difference between the original transfer
payment and what would have been paid if benefits had been equalised at the
time, with simple interest at base rate plus 1% pa (mainly paras 254, 255 and
263 of the judgement).
(g) Identify
in respect of members in category (a) what
information is unavailable or incomplete, about which some robust
and pragmatic decisions might be necessary.
END
copyright Roderick Ramage
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