Good news for lawyers, actuaries , administrators , journalists and even bloggers. The GMP remains clouded in uncertainty. This from Nick White pensions knowledge counsel at Travers Smith
The direct EU laws on pensions equality have gone. But the Equality Act 2010 remains. It required an actual comparator for a GMP equalisation claim, though EU law arguably did not. The regulations to change that may or may not be effective. If a UK court were to decide that the regulations are not effective (i.e. because it concludes that the government is wrong about the extended application of Allonby), we are then faced with unamended clear national legislation. So, the courts could decide to apply the unamended legislation and require there to be an actual comparator. But of course, the government’s position could be found to be correct.
Unfortunately, therefore, all that is clear is that uncertainties over GMP equalisation requirements continue. Single sex schemes, in particular, still have difficult questions to discuss with their advisers. In other cases, most trustees and sponsoring employers are in practice proceeding to implement GMP equalisation without actively considering whether there is in all cases an actual comparator. They may wish to document that both parties recognise that there remains some uncertainty and the scheme’s equalisation methodology may be more generous than legally required.
Good news for lawyers , actuaries and administrators is of course bad news for members and sponsors who see the cost of this uncertainty in the fees that reduce surpluses, increase deficits and may further reduce employer’s capacity to pay DC contributions. This has become the pension equivalent of Jarndyce and Jarndyce. The ongoing legal discussions will continue till every penny of spare cash in the pot is spent and we can be pretty damned sure that the pension professional will be considered the preferred creditor.
The adjustments (up and down) to people’s pension entitlements are infinitely small and cannot justify the vast expense of legal opinion , actuarial calculation and administrative execution needed to conform to the latest contortion of the law.
It is time that someone draws a line under this – as we expected the Lloyds judgement to do. But that time looks a long way away.
We have heard a lot about the fiduciary duty this week (what with the WPC spending a morning on it). Is there not a fiduciary duty on trustees to apply common sense and refuse to countenance any further expense on the ludicrous issues around Guaranteed Minimum Pensions.
Thanks to Nick White, who I hope was writing the article in Professional Pensions with his tongue solidly in his cheek. I hope that the advice from his firm to trustees will be robust and unequivocal, further expense on GMPs must be justified by a business justification based on common sense. We cannot allow GMP to become the pension professional’s benevolent fund.