The Pensions Act 2004 requires PPF compensation to be paid on a basis that is no more or less favourable to a woman (or man) than it would be to a comparable man (or woman), in respect of pensionable service on or after 17 May 1990.
To meet this requirement, the calculation of compensation payments must take into account any differences in scheme benefits that have arisen due to differences in the calculation of GMPs for men and women.
We have been exploring what this means for the calculation of PPF compensation for several years. The following information sets out what we already require schemes to undertake in order to equalise scheme benefits for the effect of GMPs and explains the latest position on the separate issue of the calculation of compensation using the statutory minimum underpin method.
The methodology and requirements set out below only relate to the calculation of PPF compensation and are not intended for general application.
We are aware that DWP remain in dialogue with the pensions industry about their Spring 2011 consultation on GMP’s. We have discussed our methodology with DWP in the course of producing our Statement and are we are confident that our approach is appropriate for our requirements of schemes that enter a PPF assessment period while DWP are considering their approach for on-going live schemes.
What are schemes in assessment required to do now?
Trustees and advisers of schemes that expect to transfer to the PPF before 31 May 2013 should not seek to implement our methodology set out in the Technical Statement.
Schemes with a Transfer date from 1 June 2013 will be expected to implement our methodology. Trustees and advisors should, in the first instance, contact their Scheme Delivery Associate to discuss any questions about the Statement.
The PPF has now produced a set of default early/late retirement factors as produced in the December 2012 Technical Statement. Further details of the default factors are provided here.
You may find our FAQs on GMPs helpful.
GMP Equalisation and Underpin Calculation Template
When calculations have been completed for implementation of PPF’s methodology during an assessment period, the Trustees or their advisers will need to complete and submit the GMP equalisation and underpin calculation template to their Scheme Delivery Associate. Provision of this template should be included in project plans and timing agreed with the Scheme Delivery Associate. Please note that this will need to be completed in addition to reflecting the impact of the GMP Equalisation on the DIL. (Users who are prompted for a password when accessing the template should ignore the request. You should be able to view the document as normal.)
The Technical Statement
The Technical Statement sets out how to adjust PPF compensation for equalisation for GMPs and the application of a statutory minimum underpin to PPF compensation in detail.
Statement on Equalisation for GMPs AND the Application of a Statutory Minimum to PPF Compensation for Schemes in a PPF Assessment Period.
(revised 19 December 2012). This supersedes the previous version from November 2011, which is at the bottom of this page. We have also produced a summary showing the main changes between the Statements.
For ease of use we have split the Statement into four separate chapters, below:
Part A: An Overview of the Process
Part B: Technical Details
Part C: The Board's Approach
Part D: Other Useful Information
Please note: We recommend Parts B, C and D are printed in colour.
For background information on the PPF's GMP pilot study and previous consultations, please refer to our GMP Background Information page.
Schemes with more than 2 NPAs
The current version of the Statement on Equalisation for GMPs does not include methodology for equalising GMP for schemes that have more than two NPAs.
For schemes where this applies, you may use your own methodology or alternatively adopt the methods shown within the proformas here. If you wish to use your own methodology, this must have been agreed by the actuarial team first. The proformas include examples for both active and deferred member cases. For pensioner members, the proformas in the Statement can be used for each NPA and the results combined, as the Statement describes. If you have any questions please contact your appointed Scheme Delivery Associate.
Deferred members who only have GMP benefits
When equalising GMP, if there are any deferred members who have only GMP benefits (i.e. no excess benefits) then please contact the PPF regarding this as the existing guidance on GMP equalisation found on the website does not cover such members. We can provide proformas for these members on request.