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.

What are schemes in assessment required to do now?

Trustees and advisers of schemes that expect to transfer to the PPF but have not been selected for the pilot study should not seek to implement our methodology set out in the Technical Statement.

All schemes should, however, complete the Scheme Questionnaire set out in Part D.2 of the Technical Statement. If you have any questions about the Statement please contact your Scheme Delivery Associate or the PPF Stakeholder Support Team in the first instance. Our FAQs on GMPs may also answer your questions.

The January 2011 Consultation and Response

Our Janaury consultation and the accompanying November response provide further information on our approach and extensive background on the statutory minimum underpin method:

• Consultation on the Calculation of PPF Compensation and FAS Assistance in the Context of Equalisation for Schemes Contracted-out on a GMP Basis (published January 2011)
• Response to the Consultation on the calculation of PPF compensation and FAS assistance in the context of equalisation for schemes contracted-out on a GMP basis (published November 2011)

The Pilot

From 10 November 2011 we are running a pilot study for six months with selected schemes in assessment to test the methodology for calculating equalising compensation for GMPs and the application of the statutory minimum. The Technical Statement sets out details of the approach that schemes in the pilot study will follow.

Trustees of schemes in the pilot study have already been contacted regarding their involvement. We are not seeking further pilot schemes at this time and all other schemes should continue to progress through assessment as normal.

During the pilot study we will examine whether there are any practical issues that need to be addressed before we implement our approach more widely with schemes in assessment.
Following the pilot study, we intend to adjust compensation for members of transferred schemes using the methodology set out in the Technical Statement. This will avoid delays and member uncertainty. We will be in contact with PPF members when that process is implemented.

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.

The PPF has previously consulted on equalisation for GMPs and links to these documents can be found at:

• Consultation on the Requirement under Section 171 of the Pensions Act 2004 to Equalise Compensation to Allow for Differences in the GMP Formula (published April 2008) 
• The Response to the April 2008 Consultation on the Requirement under Section 171 of the Pensions Act 2004 to Equalise Compensation to Allow for Differences in the GMP Formula (published October 2009)