View more on these topics

Government to reject Euro court gender test case pleas

The Government is preparing to snub calls to bring a European Court of Justice test case about how to equalise male and female guaranteed minimum pension payments due to concerns over cost.

The Association of Consulting Actuaries chairman Stuart Southall is warning that forcing pension schemes to equalise their GMP payments will cost employers £10bn. It is calling on the Government to bring a case to the ECJ to clarify how the equalisation will work in practice.

The Government is instead planning to issue draft guidance to the industry later this year. The requirement to equalise GMPs will then be formally written into UK legislation.

Southall says: “Aside from one isolated case, I have never known any beneficiary query the possible inequality of GMPs and nor does it seem there is any legal consensus that equality is required by law or even achievable if it is.

“If the Government feels it has to press ahead with an initiative which could cost the industry £10bn, plus a significant implementation bill, then would it not be best to do so with as much legal certainty as possible? This can only be achieved by an European Court of Justice test case.”

GMPs are the minimum level of pension an occupational scheme is required to provide to people who contracted out of Serps between April 6, 1978 and April 5, 1997.

The problem facing pension schemes is that, since the Barber case in 1990, they should have been calculating members’ GMP payments on a gender-neutral basis.

However, virtually all schemes have ignored the sex inequalities that existed in the calculation of the payments.

Society of Pensions Consultants president Kevin LeGrand, who has been in negotiations with DWP officials since Angela Eagle issued a statement in January last year telling pension schemes they would need to equalise GMPs, says bringing a test case would cost the DWP around £500,000.

He says if departmental spending constraints prevent the pursuit of a test case, the Government should provide a blueprint to the industry by equalising GMPs in a large-scale public sector scheme.

He says: “The Government has received legal advice that GMPs have to be equalised, so this is something we are going to need to tackle.

Hopefully, the guidance DWP is going to produce will be a step forward but we still think the best way would be a test case to the ECJ, although given the vagaries of some ECJ rulings, there is no guarantee that is going to sort it but at least then we would have a legal basis upon which to work.

“But the Government’s view is that any advantage of getting a decision from Europe is outweighed by the costs of mounting a test case.

“We have also suggested that the Government uses a public sector scheme as a path-finder to give the industry some practical guidance on how we should be dealing with this but they do not want to do that either.”

What are guaranteed minimum pensions?
Guaranteed minimum pensions, or GMPs, are the minimum level of pension an occupational pension scheme is required to provide people who contracted-out of the state earnings related pension schemes between April 6, 1978 and April 5, 1997.

What is the problem?
Since a European Court of Justice Ruling on May 17, 1990, trustees have been required to pay men and women “comparable benefits” in relation to service from the judgment date.

However, since then, most schemes have ignored the sex inequalities that existed concerning the calculation of GMPs. For example, women are entitled to receive their GMP at age 60 compared with age 65 for men.

The complexities in making male and female GMPs equal meant the pension industry and the Government kicked the issue into the long grass for 20 years.

What is the Government’s stance?
In January 2010, former pensions minister Angela Eagle told schemes they would need to make specific adjustments to benefits to compensate members for the unequal effects of GMPs.

Officials at the Department for Work and Pensions have received legal guidance that pension schemes must do this. </B>

What happens next?
The DWP is likely to publish draft guidance later this year, although an European Court of Justice test case is not expected to be pursued on cost grounds.

Recommended

Alexander sours union pension talks

The Government’s negotiations with unions over public sector pension reforms are in jeopardy after Chief Secretary to the Treasury Danny Alexander’s “inflammatory” intervention. In a speech last Friday, Alexander appeared to pre-empt final discussions with union chiefs by announcing plans to increase contributions for public sector employees earning more than £18,000 by an average of […]

5

Could auto-enrolment force IFAs to revisit pension clients?

If regular-premium personal pensions face annihilation at the hands of auto-enrolment, then how long before the regulator decides IFAs should write to existing clients saying they would be better off in their new company scheme? We do not yet know whether there will be an RU64 for advisers. In February, Nest disclosed that it had […]

2

Andy Milburn joins Ageas Protect

Former Munich Re head of marketing Andy Milburn has joined Ageas Protect on interim basis as head of marketing for the insurer. Milburn has (pictured) taken the role on an initial six-month basis. Ageas Protect has also announced the appointment of Darren Spriggs as operations director and Mike Urmston as chairman. Spriggs join from Ageas […]

4

Should the IMA be merged into the ABI?

As a schoolboy, I recall asking what the prefix “applied” (for example, applied maths, applied chemistry) stood for. I was told it meant moving from understanding the theory to practical application of the theory. Adviser-charging has, for many, remained theoretical and, even worse, some see commission offset as the same thing under a different banner.Let’s […]

UK housebuilders remain a value trap – despite post-Brexit falls

Despite the sharp drop in housebuilders following the Brexit result, valuations in the highly illiquid market are still at elevated levels. And whilst some investors may take comfort from superficially low price/earnings multiples, are earnings sustainable over the long term, asks Holly Cassell, Assistant Manager of the Neptune UK Mid Cap Fund. Click here to […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com