Guaranteed Minimum Pensions (GMP) came about when employees
opted their employers out of the State Earnings Related Pensions Scheme (SERPS)
between 1978 and 1997. The common pension vehicle for this was Defined Benefit/Final
Salary Schemes, where benefits were built up alongside employee benefits.

In 1990, it became law that all UK pension schemes should
allow an equal retirement date for both men and women.  Before this date, it wasn’t uncommon for UK
occupational scheme to have unequal retirement ages for example 65 for men and
60 for women. This echoed the state pension retirement ages at the time and so
was deemed to be fair and consistent.

The law was changed when Mr Barber took his previous employers pension scheme, Guardian Royal Exchange to the highest European court.  He argued that in was unfair for him to wait to receive his pension (he was 52), as if he were a women, he would be able to receive his pension immediately.

The European Court of Justice ruled in his favour after a lengthy
process involving complaints to the Employment Tribunal, Employment Appeal
Tribunal and the House of Lords.

The result was an equalisation of retirement ages for both
men and women.

The problem regarding GMP was that, even though the state
pension ages for women are being graduated to be the same age as men, GMP
benefit calculations were never altered. The calculation to equalise benefits
were so complex that when calculating transfer values, these were largely

The result of not including GMP equalisation into the transfer value of those who wished to move out of defined benefit scheme has meant that, up until the recent ruling, millions of pounds have been missed of member transfer values.

The recent judgement, involving Lloyds Banking Group, has
now detailed the specific calculation for schemes to do in order to offer a
fair and fully GMP inclusive transfer value.

The problem for those who have already transferred is that they’ve missed out on the uplifted transfer value. There is now a huge piece of work for scheme to recalculate already transferred pension and forward on any owed pension fund monies. They may need to recalculate the past 28 years transfers.

learn about : Cashing in a small defined benefit scheme

Any new request for a cash equivalent transfer value will
now include the specified GMP equalisation uplift.

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