The Government is facing mounting industry opposition over plans to equalise guaranteed minimum pension payments between men and women.
GMPs are the minimum level of pension an occupational scheme must provide to people who contracted-out of Serps between April 6, 1978 and April 5, 1997.
On May 17, 1990 the European Court of Justice ruled that occupational pensions were a form of deferred pay and, as such, it was unlawful to discriminate between men and women.
It was subsequently decided by the Court that the decision applied to any pension that accrued from the date of the judgment, including GMPs.
However, GMPs accrue at different rates for men and women and are payable at different ages. Despite the ruling, virtually all schemes have ignored the sex inequalities that exist in the calculation of the payments.
The Government now wants all schemes to comply with European law by equalising all GMPs that have accrued since May 17, 1990. In January, the DWP proposed an equalisation method which relies on a comparison between a member’s GMP and their GMP had they been of the opposite sex.
The DWP says schemes should then pay the higher of the amount the member would receive under scheme rules and the amount they would have received under the rules were they of the opposite sex.
A joint letter from seven influential trade bodies, including the ABI and the NAPF, urges pensions minister Steve Webb to reconsider the proposed method, which they say is complicated and will cost schemes around £13bn.
The letter says: “The method is probably the most expensive of those that the DWP could have chosen to support. It works on the assumption that every instalment of a member’s pension would be calculated twice, the first time based on male benefits and the second based on female benefits.
“In our view this is unjustified expense: a more appropriate method would focus on raising the overall value of benefits for the gender with the lower actuarial value up to the higher actuarial value of the other gender.”