What's going on with GMP?
As your pension Trustee, we need to make sure you get the GMP you are entitled to.
Checking our records
We have been checking our GMP records against the records HM Revenue & Customs (HMRC) holds.
We worked with HMRC to:
- identify any records we held which did not match; and
- calculate the correct amount of GMP.
This is known as reconciliation. It is a big project, covering all records from 6 April 1978 to 5 April 2016, and has been going on for some time.
There are a number of reasons why our records could be different from HMRC’s. Some of the records are over 40 years old and began before modern computers, when everything was done manually. Errors could have crept in when things changed, such as people transferring into or out of pension plans, or pension plans combining.
Making adjustments
Once we have checked and (if necessary) corrected our records, we will move on to adjusting the GMP element of members’ pensions to match the records.
This is known as rectification. It could mean your pension goes up if you are affected. Most changes are likely to be small. The Trustee and the Company have agreed that even if we find that your pension has been overpaid in the past, we won’t reduce your pension or ask you to pay any money back.
Equalising benefits
We also need to equalise pension benefits for the effects of GMP. This means we have to make sure pension benefits that include GMPs are equal between men and women.
This applies to pensions built up between 17 May 1990 and 5 April 1997 (or between 17 May 1990 and 31 October 1996 in the case of the GSK Pension Fund), when GMP stopped building up. In other words, anyone with GMP that built up between these two dates must receive the same amount of benefits as if they’d been the opposite sex.
GMPs for men and women are likely to be different for a number of reasons, including:
- different GMP ages – 65 for men and 60 for women
- women’s GMP built up at a different rate than it did for men, due to the lower GMP age
- GMP for men and women may increase at different rates
The need for equalisation can apply to women and men, to people who are already receiving their pensions and people who haven’t yet started to take their pensions.
Some people may see a small increase to their pension benefits because of equalisation. We have agreed with the Company that no-one’s pension benefits (before application of consequential tax charges, if any) will reduce because of equalisation.
A short history of equalisation
Why do we have to equalise pensions from 17 May 1990, when GMP started building up in 1978? There’s a legal reason.
The Barber judgement
Before 1990, most pension schemes had different retirement ages for men and women – generally 65 for men and 60 for women, in line with the State Pension Ages at the time.
On 17 May 1990, the European Court of Justice decided in favour of a man named Barber. He had been made redundant and was not entitled to start taking his pension straight away – even though, due to the different retirement ages, a woman the same age would have been. He successfully argued this was discrimination, based on the right to equal pay for men and women.
After the Barber judgment, most pension schemes introduced equal retirement ages for men and women. However, this did not go as far as equalising benefits because GMPs for men and women were still different.
Conversations about equalisation went on in the pensions industry over the following decades, but there was no agreement on how to equalise benefits between men and women for the effects of different GMPs – until another case came to the High Court.
The Lloyds ruling
In 2017, the trustees of the Lloyds Banking Group pension schemes applied to the High Court for a ruling on whether there was a legal requirement to equalise pension benefits for the effects of GMP.
On 26 October 2018, the High Court ruled that:
- there was a legal requirement to do this; and
- all pension schemes with GMP must equalise pension benefits for men and women between 17 May 1990 (the date of the Barber judgement) and when GMP stopped building up – for most schemes this is 5 April 1997, but for the GSK Pension Fund this is 31 October 1996
Since the Lloyds ruling, HMRC has published guidance about equalising GMPs and work has started in many pension schemes, including our Plans. However, GMP is complicated and equalisation will be a long and time-consuming process involving a lot of careful work to compare pension records. We have engaged specialist advisers to help us with this work and we are expecting it to continue for the next few years.
What happens next
Once we have completed our investigations, we will write to our members and dependants whose pensions have been affected by our work on GMPs. We will send letters out in stages, so some of you might receive yours earlier than others.
The investigations are complicated. GMP reconciliation, rectification and equalisation may not take place for all members at the same time and the work may take several months, or years, to complete.
We will write to tell our affected pensioner members and dependants:
- the total value of your pension benefits including your GMP,
- how your pension benefits will be adjusted and when,
- the new value of your pension including your GMP, and
- if you qualify for a back payment, how much this will be.
If you don’t hear from us, you can assume that your pension isn’t changing.
If you’re not yet receiving your pension, we’ll adjust your pension benefits at the point you start taking them, so you won’t receive a letter about your GMP benefits yet. For most people, any changes are likely to be small. GMP, although important, is not a significant part of most people’s pensions.
We are carrying out GMP reconciliation, rectification and equalisation on deceased members’ pensions too. If you are the dependant of a member who has died, you might receive a letter from us about a back payment in respect of their pension too. Please see our FAQs for more on this.
Windfalls are unlikely
Following the Lloyds judgement, there were media stories suggesting people could expect large windfalls as a result of equalisation. We should stress that for most people, any changes and back payments are likely to be relatively small. GMP, although important, is not a significant part of most people’s pensions.
A GMP timeline
6 April 1978
Contracting out begins
GMP starts building up
17 May 1990
Barber judgement
1 November 1996
GSK Pension Fund is contracted-in
6 April 1997
GMP stops building up in SmithKline Beecham Plans
Contracting-out changes
5 April 2016
Contracting out ends
26 Oct 2018
Lloyds ruling
Schemes start looking at equalisation
2018-2024
We reconcile our GMP records with HMRC and carry out rectification and equalisation
Starting 2022 and continuing into the coming years
Members start receiving GMP letters in stages.
Corrected pensions start to be paid to pensioners.
The information above sets out the Trustee and GSK’s current approach to, and understanding of, GMP Equalisation. The Trustee and GSK each reserve all rights to change their approach in future. The information above does not confer any right to benefits.