How are schemes getting on?
Steady progress
As part of our annual Chart your own course survey we asked a selection of PLSA members and our clients how they were getting on with their GMP equalisation projects. Almost 75% have started their journey but fewer than 5% have finished it.
Steady progress
As part of our annual Chart your own course survey we asked a selection of PLSA members and our clients how they were getting on with their GMP equalisation projects. Almost 75% have started their journey but fewer than 5% have finished it.
Why is this?
- Prioritising what's important: With major changes in funding levels and important strategy decisions to take on the back of increases in interest rate and inflation expectations, many schemes have not surprisingly prioritised investment and journey planning. GMP equalisation is a necessary task, but it should not come at the cost of missing strategic opportunities, such as completing a buy-in – See our de-risking report for confirmation of insurer priorities.
- Dividing into manageable chunks: GMP equalisation is a significant project – Schemes are dividing work into more manageable tasks to ensure progress can be made whilst not distracting from other projects – Our 6 step plan can help you do this.
- Starting with quick wins: Most schemes have started with data work on non-pensioners and equalising transfer values, as these are potential quick wins.
- Address existing members first: Most are leaving top-ups to past transfers last.
- Making informed decisions: important not to rush into making a decision on equalisation method. Each pension scheme is different.
Why is this?
Prioritising what's important:
With major changes in funding levels and important strategy decisions to take on the back of increases in interest rate and inflation expectations, many schemes have not surprisingly prioritised investment and journey planning. GMP equalisation is a necessary task, but it should not come at the cost of missing strategic opportunities, such as completing a buy-in – See our de-risking report for confirmation of insurer priorities.
Starting with quick wins:
Most schemes have started with data work on non-pensioners and equalising transfer values, as these are potential quick wins.
Address existing members first:
Most are leaving top-ups to past transfers last.
Making informed decisions:
Important not to rush into making a decision on equalisation method. Each pension scheme is different.
Six steps to achieving equality
1. Determine your strategy
Consider the wider implications of equalisation for your scheme and its interaction with other priorities and your strategic objectives
2. Gather the data
Gather the data and information you need, focusing on what matters for the members concerned. For most members you will not need a lot of data, but for a few some extra data could be really material.
3. Focus on non-pensioners
Get your non-pensioner records in order, completing any remaining GMP rectification work for these members and starting to quote equalised transfer values if you haven’t already.
4. Arrears
Calculate the extent to which pensioners and dependants have been underpaid, including from GMP reconciliation. Use this information to see what each method would really mean in practice for your scheme and members
5. Future payments
Make an informed choice for the equalisation method to apply in your scheme for the future based on analysis of the impact for your members, pay arrears in respect of past underpayments and equalise future benefit payments.
6. Past members
Review historical transfer values and other exits to establish if these former members were underpaid and pay a top up where practical to do so.