Lloyds GMP equalisation judgment update

There was a further hearing in the High Court yesterday following up on some elements of the recent judgment in relation to GMP equalisation. While not yet confirmed, this clarification may provide a simpler way forward than previously thought for some trustee business as usual matters (transfers out and trivial commutation) and may remove some of the uncertainty from the original judgment.

Methodology

The judge was asked to clarify the position on how GMP conversion (Method D2 in the original judgment) could be applied. The Court has now been asked whether:

• This method is free-standing, with equalisation being achieved by taking the higher of the values of the unequalised benefits for both genders and using the GMP conversion legislation to convert that higher value into some form of revised benefits; or
• It must be applied in conjunction with one of the other methods, so that benefits would first be equalised using one of Methods A, B, or C, followed by conversion of the resulting projected stream of future equalised payments.

The judge confirmed he would issue a clarification on this point shortly, but suggested in court that the first approach would be valid for future benefit payments.

If the judgment is clarified along these lines, this may provide a route to allow trustees to more easily process current transfer out and trivial commutation requests on an equalised basis. Trustees should discuss with their lawyers and actuaries how to put this into practice, as there will be a number of matters to consider and there may still be some difficult decisions required.

What about an appeal?

The representative beneficiaries sought permission to appeal two aspects of the judgment (in relation to the methodology and the forfeiture period for back payments). The judge refused permission to appeal. However, the case could still be taken to the Court of Appeal and although this now seems less likely, the possibility of an appeal remains open.

Other questions

There was no discussion at this hearing on the position with regard to past transfers, nor on other points arising from the judgment that may need to be resolved for some schemes before they can implement the judgment.

Accounting implications?

Since the judgment, we have seen a lot of focus from companies on the implications for their end year accounting. Yesterday’s hearing does not materially change the position reached in October’s judgment, but the possibility of an appeal remains open, as does the uncertainty on past transfers.