LCP responds to new PASA Pensions Tax Guidance on GMP Equalisation

The PASA chaired Equalisation Working Group instigated by the Pensions Regulator has today published industry good practice guidance on the pensions tax treatment of equalising members’ benefits for Guaranteed Minimum Pensions (GMPs). The guidance builds on that issued by HMRC in February and July 2020.

Shayala McRae, Senior Consultant at LCP and an author of the guidance said:

“This guidance will be really helpful for those paying equalisation uplifts to members.

We have sought to show how tax needn’t be taxing for most members, setting out practical approaches for scheme administrators to do what is needed without causing members unnecessary concern or hassle.

There will be a few cases where tax bills of tens of thousands of pounds could result from equalisation. We have set out what the issues are to help identify these rare cases and how the tax could potentially be paid from the additional benefits, so members don’t face nasty surprises later on.”

Alasdair Mayes, Partner at LCP said:

“The guidance also highlights that there are potential pensions tax issues with using GMP conversion to achieve equality. Having successfully implemented several GMP conversion exercises I am delighted to have been able to form a cross industry group for PASA to deliver a set of examples showing how GMP conversion is being used in practice. I hope this will prove really valuable for those embarking on their equalisation journey. We plan to publish in the Spring.”