Equal treatment of Guaranteed Minimum Pensions (GMPs) for men and women

There has been a ruling in regard to GMPs recently.

For pensions earned from 17 May 1990 (the date of an earlier equal treatment judgment in the case of Barber v Guardian Royal Exchange), pension schemes have had to provide equal benefits and equal retirement ages for men and women.

However, like most UK schemes, pensions built up by APS members between April 1978 and April 1997 included a Guaranteed Minimum Pension (GMP). This was because APS was 'contracted out' of part of the State Pension arrangement (called the State Earnings Related Pension Scheme - 'SERPS', later renamed as the State Second Pension - 'S2P'). Contracting out of SERPS meant that both companies and members of pension schemes paid lower National Insurance contributions as they were building up a pension in a company scheme instead of SERPS. The State Pension age differed for men and women so GMPs were due at different ages for men and women too. State Pension age is now equal for men and women (and gradually rising to 68 for people born after 6 April 1977) but the ages that GMPs apply from have stayed the same (age 60 for women, age 65 for men).

The Government has said that it believes that GMPs built up by men and women after 17 May 1990 should be treated equally. In October 2018, the Trustee of the Lloyds Banking Group pension schemes asked the Court to clarify the position for its schemes. The Court decided that the Lloyds Banking Group pension schemes should equalise GMPs built up between 17 May 1990 and 5 April 1997 for men and women but the ruling affects all pension schemes where GMPs have been built up.

The Court also suggested methods that could be used to achieve equal treatment of GMPs. Some of these might entail a significant overhaul of existing systems and it's possible that it could take several years to agree on an acceptable method and for schemes to identify which members are affected and recalculate benefits that have been worked out and paid. For APS members, this might result in a small, backdated adjustment to pensions paid over the last 20 years.

GMPs were calculated differently for men and women and paid from different ages (65 for men and 60 for women), reflecting the different State Pension ages for men and women at the time GMPs were built up.

Historically, State Pensions were paid to men and women at different ages (65 for men and 60 for women) and GMPs were also due to be paid from age 65 for men, age 60 for women. As a result, men and women could build up GMPs at different rates with payment due from different ages.

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We believe the Court judgment could affect male and female members of APS who built up a GMP between 17 May 1990 and 5 April 1997 (i.e. from the date of the Barber versus GRE judgment to the date that build-up of GMPs ceased — but we are waiting for these dates to be formally confirmed). This judgment affects both deferred pensions and pensions already in payment. Where a member has died, we might be paying an Adult Survivor’s pension to a husband, wife or civil partner. If the pension includes a GMP, we may need to review these pensions too.

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The effect (if any) on your individual pension entitlement will depend on your personal circumstances. Any increase to your pension benefits is likely to be small and the value of your pension benefits will not be reduced.

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No. There's nothing you need to do — we'll take care of everything for you. Once we've worked out exactly what needs to be done, we'll write to you if you are entitled to a top-up to your APS pension.

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The Court judgment affects members of many UK pension schemes. There's still a lot of legal uncertainty about certain aspects of equal treatment of GMPs for men and women and it could be a long time before any pension top-up calculations can be carried out. It may therefore be many months (or even years) before we are able to check your individual pension. This is due to the uncertainty that still remains following the Court judgment and the complex nature of the calculations we'll need to carry out.

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We'll continue to process and pay your APS benefits on the current, unadjusted basis. As soon as we're in a position to work out how equal treatment of GMPs for men and women is likely to affect your APS pension, we'll write to you if any additional payments become due.

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We'll work out and pay the transfer value of your APS pension on the current, unadjusted basis. As soon as we're in a position to work out how equal treatment of GMPs for men and women is likely to affect your APS pension, we'll write to you if any additional payments become due. The arrangement receiving the transfer value of your APS pension will need to be able to accept an additional transfer payment (if we work out that one is due). If they will not accept a further payment we may not be able to pay it to you. You should check this with your new pension arrangement before we complete payment of your transfer value as we cannot reverse the transfer once we have paid it.

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At the moment it is not clear whether there will be any effect on members who transferred their benefits out of APS before the Court judgment. A further legal hearing is due to take place (called a 'Consequential Hearing') following the judgment in the Lloyds Banking Group case. This is likely to take place sometime in 2019. We'll write to members who may be affected if it is possible that we'll need to pay an additional transfer value amount, as soon as we have more information.

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Subject to some statutory conditions, members with very small pensions can usually cash them in for a one-off lump sum, less tax. This is called 'trivial commutation' and includes deferred pensions and small pensions that are already in payment. If the pension includes a GMP, we might have to put these calculations on hold until we have considered how the Lloyd's judgment affects this option. We'll explain this if the trivial commutation option would normally be available to you.

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