GMP Reconciliation final HMRC listings - The end or just the beginning?

A year after they were initially promised, last week schemes started to receive their final reconciled listings of Guaranteed Minimum Pensions (GMPs) from HMRC.

But what does this actually mean? What do trustees have to do with the final listings? What if the information in the final listings is different from what trustees were previously told? Can trustees now start the GMP rectification exercise and how does this impact GMP equalisation?

Let me help break this down.

The ‘HMRC listing’ will show the final position of the GMPs as held by HMRC. However, this may not necessarily be the same as the GMPs that trustees wish to use going forward – you may have decided to agree to disagree with HMRC or have already applied a de minimis thresholds (e.g if a GMP was within an agreed tolerance, often £2 per week, then HMRC's GMP was accepted as being correct).

The trustees therefore need to make sure that the administrator or whomever undertook the reconciliation has recorded the actual GMP that it has been agreed the Scheme will pay for each person (for the purpose of the blog I will define this as the ‘Scheme listing’).

So, each scheme should have two final listings – the HMRC listing and the Scheme listing.

The Scheme listing is the really important one as it will be these figures that are used for future GMP rectification and GMP equalisation work.

Now that the final HMRC listing is available, trustees should now undertake a check to ensure their scheme membership agrees with that on the HMRC listing: it's quite likely new members have appeared given the nature of the reconciliation process and other schemes moving members around at the last moment. Unfortunately, if there are unexpected membership differences there isn’t anything you can do to change HMRC’s listing. What you therefore need to decide (with advice from your lawyers) is what to do with any new members and whether these ‘new’ liabilities are added to your final Scheme listing.

You may also want to double check that the GMP amounts that were previously reconciled are still as expected. This shouldn’t mean another full reconciliation, more of a spot check that the GMP amounts are consistent with what you expect. If there are differences then you might choose to undertake a thorough check on all the amounts. If members are below GMP age, then any differences can be challenged with HMRC when the individual crosses GMP age (or another life event such as Death). If members are over GMP age then you will need to decide (with advice from your lawyers) the GMP amount you are going to include in your final Scheme listing.

The next phase is GMP rectification and there really is no excuse for not pushing on with aspects of that project now. So now that the final listings are here, trustees should follow these 5 steps to ensure that they are at the end of reconciliation and not scratching their heads and starting again:

1. Ensure there is a Scheme listing and HMRC listing.
2. Check that the scheme’s membership on the HMRC listing is as expected.
3. If different speak to the scheme’s administrators to investigate to be sure that the HMRC records are accurate.
4. Seek legal advice and use the Pensions Administration Standards Association (PASA) guidance if the intention is to do something different to what is shown on the HMRC listing.
5. Run a final check on the GMP amounts and finalise your Scheme listing.

If you follow these 5 simple steps you will be in a great position to start your rectification and equalisation projects, oh the joy!