After a flurry of activity post the Lloyds judgement, the industry broadly settled on some early actions and a holding position.
After this initial storm, a pause. Most Trustees have decided to slow down further progress on GMP Equalisation. Further clarification is awaited on historic transfers, conversion legislation, de-minimis thresholds and implications in terms of tax. We are also awaiting input from the PASA-led cross-industry GMP Equalisation Working Group set up by the Pensions Regulator.
While in this holding pattern, there is an occasional flurry of activity. For example, I get intermittent emails from concerned clients asking how much pension administration charges will change under C2 as compared to D2. However, are we asking the right questions and is there really nothing more valuable that can be done for the moment?
There is much that is already known and work we can do to prepare ourselves for GMP Equalisation. Getting GMP Equalisation right is about the journey rather than the destination. There are a number of hurdles that need to be crossed prior to even making a decision on the equalisation methodology that is relevant to each scheme. Trustees, their advisors and administrators must start this process now. Here are a few of the questions that Trustees should seek to answer:
All of these steps can be progressed today. Completing them is non-linear as there are a number of dependencies between steps. We can also confidently state that the industry expects a major resource crunch when all impacted schemes across the country attempt to upgrade their schemes to the point where the GMP Equalisation process can actually commence, so it will be wise for Trustees to get their projects into the queue early.
The actual decision of which methodology to use, how much it will cost to equalise and the impact on ongoing administration post-equalisation is actually a secondary issue that will need to be considered only after this initial phase is completed.
As with any long journey, we need to start with a map, plan the route, agree interim objectives and firm our timelines. This will make the journey enjoyable, rather than merely focussing on when we reach the destination.