You may have seen in the news that on 26 October 2018, the High Court ruled defined benefit (DB) pension schemes must equalise Guaranteed Minimum Pension (GMP) for men and women and update their rules as a result.

Why has this happened?

From 6 April 1978, a pension scheme could opt-out of the State Earnings Related Pension Scheme (SERPS) and pay less National Insurance (NI). In exchange, the scheme would then be responsible for paying a GMP to the member. The GMP is equivalent to the amount of SERPS the member would have earned had he or she not been contracted out. In 1990, the courts ruled occupational pension schemes must equalise the retirement ages for both men and women (for example, a scheme who had retirement ages of 60 for women and 65 for men could opt to equalise the retirement age to 65 for women as well as men). However, GMPs did not equalise in the same way and can result in inequality because:

1. GMPs are payable at age 60 for women and 65 for men
2. GMPs attract different increases before and after retirement
3. GMP increases tend to be lower than scheme increases on non-GMP elements
4. GMPs build up at a quicker rate for females than for males

There are other factors that result in the inequality of GMPs, and the ruling seeks to address them, and where necessary, make good any shortfalls that a member may have suffered as a result.

How is the Scheme affected?

At present, the Trustee is not able to say definitively what impact the ruling will have on the Scheme, however they want to reassure members that they are aware of the ruling and will be considering their next steps. The Trustee will continue to update you as and when they know more.