GMP equalisation

Equalising for the effect of GMPs and transfer top-ups post Lloyds

The High Court’s decision in the first Lloyds Banking case finally clarified the need to equalise for the effect of GMPs. More recently, the same High Court judge concluded that trustees may owe a duty to pay a top-up in respect of past transfers which did not reflect the right to equalised benefits.

Trustees and employers with GMPs should therefore seek legal and actuarial advice on the implications of both cases and next steps.

What is unequal about GMPs?

From 6 April 1978 up to and including 5 April 1997, individuals could accrue an entitlement to an earnings-related addition to their basic state pension, called the State Earnings Related Pension Scheme (SERPS). An employer could contract its scheme out of SERPS if it was designed to provide a pension at least as good as a statutory minimum, known as the GMP. The GMP is a component of a member’s total scheme pension.

The method for calculating GMPs is set out in legislation and can result in inequality, predominantly because GMPs are payable from different ages (65 for men, 60 for women) and GMPs consequently accrue at different rates.


In the Barber case (17 May 1990), the ECJ ruled that occupational pensions were deferred pay and, as such, schemes were required to treat men and women equally. As a result schemes “equalised” their retirement ages, often at age 65, and adjusted their benefits accordingly.

The Lloyds decision provides long-awaited clarification that there is a requirement to equalise for the effect of GMPs and approves methods to achieve this. See our Alert for details.

In the High Court’s latest decision, the judge concluded that trustees owe a duty to a transferring member to pay a statutory transfer which is correctly calculated, reflecting the member’s right to equalised benefits. Trustees are therefore on the hook to pay a top-up to the receiving scheme, together with interest, and there is no time limit on former members bringing a claim. See our Alert for details.

Whether other types of transfer are caught, such as a transfer under scheme rules or on a bulk basis, will boil down to a number of factors, such as the drafting of the scheme rules, whether the transfer was “mirror-image”, and any agreements reached at the time.

How we can help

  • prioritising immediate next steps
  • communicating with and helping pensions teams to answer questions from members
  • considering options for achieving equalisation best suited to the scheme’s circumstances, including GMP conversion
  • drafting changes to scheme rules to reflect the selected method
  • advising on the potential for limiting backpayments
  • considering the impact on any member or bulk scheme exercises (such as PIEs, buy-ins / out, closure and winding up)
  • advising on commutation payments
  • advising on actuarial proposals for calculating transfer values on an interim basis, pending equalisation
  • analysing past transfers to identify potential liability to pay a top-up or, in contrast, the likelihood of receiving one.