What is GMP equalisation and how did it come about?

1. What is the Lloyds Banking Group case on GMP equalisation all about?

The Lloyds Banking Group case went to the High Court to ask whether the differences in benefits between men and women as a result of Guaranteed Minimum Pensions (GMPs) need to be equalised. This is known as "GMP equalisation". The case also considered which calculation method to use to adjust members' benefits. (See questions 4 to 7 for more information about what GMPs are.)

The judgment was announced on 26 October 2018 and confirmed that GMP equalisation is required. It provided a number of options for achieving this.

Many UK pension schemes now need to act on the Court’s decision. Members could be affected if they are in one of these schemes and built up a GMP between 17 May 1990 and 5 April 1997. This will include most 'defined benefit' schemes and some 'defined contribution' schemes.

2. Is the judgment final?

The Court deadline for appeal has passed. However, there were some questions that the Court did not rule on (for example, the treatment of members who have transferred benefits) which were subject to a separate hearing in October 2020 and judgment in November 2020 (see question 8).

3. Which members could be affected by the Court's decision?

The Court decision is only likely to affect some members, or beneficiaries relating to members, who built up a GMP between 17 May 1990 (when the equal pension rules started to apply) and 5 April 1997 (when GMPs stopped building up). See question 7 for more information on the equal pension rules, also known as ‘the Barber case’.

It could apply to both men and women, whether retired or not.

Members who did not build up any GMP between those dates won’t be affected.

4. What is a Guaranteed Minimum Pension (GMP)?

A Guaranteed Minimum Pension (GMP) is the minimum level of pension that an occupational pension scheme has to provide for those employees who were contracted out of the State Earnings-Related Pension Scheme on a salary-related basis, at any time between 6 April 1978 and 5 April 1997.

5. Why were GMPs introduced?

The State pension originally consisted of two elements – a flat rate Basic State Pension and the Additional State Pension, known as the State Earnings Related Pension Scheme (SERPS). Since 6 April 2016, these State Pensions have been replaced by a new single tier State Pension (S2P).

Typically, members of the Barclays Bank UK Retirement Fund were contracted out of SERPS/S2P, which meant that they and their employer paid lower National Insurance. These members built up a lower Additional State Pension, but in return, the scheme had to guarantee a minimum level of pension for membership between 6 April 1978 and 5 April 1997. This ‘Guaranteed Minimum Pension’ (GMP) was intended to be broadly equivalent to the SERPS pension they would have received from the State.

6. Why are GMPs unequal?

State Pensions were paid to men and women at different ages (65 for men and 60 for women), but were gradually equalised, so that both men and women had a State Pension Age of 65 by November 2018. However, GMPs are still payable from age 65 for men and age 60 for women. As a result, men and women could build up GMPs at different rates and their GMPs would be payable at different dates.

The Government set the rules for GMPs and the UKRF had to follow these rules.

In 1990, following a court case (Barber v GRE), occupational pension schemes had to treat pensions equally for men and women for any benefits built up after 17 May 1990, including the same pension age. However, it was unclear whether this ruling covered GMPs because they were based on the old State Pension system, which was not affected by the Barber ruling.

7. What is GMP equalisation?

For many years, the Government and the pensions industry have been trying to agree how to approach equalising GMPs and many have even questioned whether or not equalisation is legally required. As a result few, if any, schemes were able to take practical action – until now.

8. Does GMP equalisation apply when members have transferred their benefits to other arrangements?

In the original judgment, the Court did not rule on the treatment of members who have already transferred out of a scheme where they built up GMPs between 1990 and 1997.

Further Court hearings on the treatment of transferred benefits took place in 2020 with a judgment handed down in November 2020. We’re working through the implications of the judgment and we will update this information once we know the outcome.

Who is affected?

9. Am I likely to be affected?

We have been reviewing UKRF members’ pensions, to see if they need to increase to make up for unequal GMPs. We will contact you if you are affected.

The only members of the UKRF who could possibly be affected are those who were building up benefits in one of the following sections between 17 May 1990 and 5 April 1997:

• 1964 Pension Scheme (including former Woolwich Pension Fund members)
• Capel Cure Scheme
• AP89 Pension Scheme (former Allied Provincial PLC 1989 Pension Scheme)
• Mercantile Plan
• Barclays Capital Scheme

You will not be affected if you are in one or more of the sections below (unless you also have benefits relating to the relevant period in the above sections):

• Afterwork
• Career Average Scheme
• Pension Investment Plan
• Retirement Investment Scheme
• 1951 Plan

10. How much money could I get from this?

Some members may receive an increase to their pension benefits, but we expect the amounts for the vast majority of members to be very small. However, we want to put this right for all our members and will let you know if you are affected.

Some members may also receive a one-off additional payment to cover the pension they should have received up to now. This will include interest. See question 11 for more information.

Look through our People like me scenarios to understand more about who is affected.

11. What rate of interest are you using when working out my additional payment?

We’re calculating the interest at the rate set out in the judgment:

• Simple interest at an annual rate of 1% above the UK bank base rate

We’re calculating the interest monthly, using 1% above the UK bank base rate that applied in each month.

12. Will my benefits go up?

Not necessarily. You may not have any GMP benefits earned in the relevant period. Even if you do, since the GMP is usually a small part of a pension, you might see little or no difference to your overall pension.

13. Could my benefits go down?

No, the amount you receive won't go down.

14. I receive an increase every April on my GMP, will this be affected?

No, any increase payable on your GMP will be paid as normal with your April pension payment.

15. How did you review my UKRF pension?

We worked out the amount of pension you built up between 17 May 1990 and 5 April 1997. For some members, we also had to look at the benefits built up after 5 April 1997. We then worked it out again over the same period, but as if you were a member of the opposite sex (the ‘alternative’ pension). Everything else about the calculation was the same: for example, your age, salary, and the date you retired.

This told us:

• Whether your current pension is lower than the ‘alternative’ pension would be – and if so, we would increase your current pension; and
• Whether you’ve received a lower pension than the ‘alternative’ in past years – and if so, we would pay a one-off additional payment (which includes interest) to make up the difference.

When working out your pension increase in future, we will check that we are treating benefits equally for men and women and allow for this in your pension.

What do I need to do to receive my increase?

16. What do I need to do to receive my increase?

You don’t need to do anything. The administrators are reviewing pensions for everyone who might be affected. This is a big undertaking as there are thousands of pensions to review and we are writing to people in stages, starting in Spring 2022. We hope to contact everyone affected by Summer 2024.

We’ll contact you if your pension needs to increase or if there is a one-off additional payment due. We’ll then increase your pension or pay the additional payment, or both.

If you receive an additional payment, there may be tax issues to consider. See question 17 for more information.

Don’t worry if a former colleague receives a letter and you haven’t. It may be that your pension has not yet been reviewed, or that your pension does not need to be adjusted for an unequal GMP.

17. Would the higher pension or one-off additional payment affect the income tax I pay?

It is possible that receiving a higher pension could move you up into the next income tax band. It is also possible that receiving an additional payment could move you up into the next income tax band for this tax year only.

You are responsible for paying any tax that is due on the interest that is paid to you as part of a one-off additional payment.

See question 18 for information about income tax rates and your personal allowance.

Please refer to Tax explained for information on how your tax position might be affected.

Please remember that it is your responsibility to manage your tax affairs and we cannot advise you on your own tax position.

18. What are the current standard Personal Allowance and tax bands?

In the tax year 6 April 2023 to 5 April 2024, the standard Personal Allowance in the UK is £12,570, which is the amount of income you do not have to pay tax on.

Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. And it’s smaller if your income is over £100,000.

Here are the tax rates you pay in each band if you have a standard Personal Allowance of £12,570 and you live in the UK excluding Scotland.

Band	Taxable income	Tax rate
BandPersonal Allowance	Taxable incomeUp to £12,570	Tax rate0%
BandBasic rate	Taxable income£12,571 to £50,270	Tax rate20%
BandHigher rate	Taxable income£50,271 to £150,000	Tax rate40%
BandAdditional rate	Taxable incomeover £150,000	Tax rate45%

You can find further information along with the future tax year allowances and income tax bands on HMRC’s website.

Here are the tax rates you pay in each band if you have a standard Personal Allowance of £12,570 and live in Scotland:

Band	Taxable income	Tax rate
BandPersonal Allowance	Taxable incomeUp to £12,570	Tax rate0%
BandStarter rate	Taxable income£12,571 to £14,732	Tax rate19%
BandScottish basic rate	Taxable income£14,733 to £25,688	Tax rate20%
BandIntermediate rate	Taxable income£25,689 to £43,662	Tax rate21%
BandHigher rate	Taxable income£43,663 to £125,140	Tax rate42%
BandTop rate	Taxable incomeover £125,140	Tax rate47%

You can find further information along with the future tax year allowances and income tax bands on the Scottish Government’s website.

If you have a question about your individual tax situation, please call HMRC (the helpline number is 0300 123 1079), with your National Insurance number to hand. The tax office address is: HM Revenue & Customs, Pay As You Earn & Self-Assessment, BX9 1AS.

19. When can I expect to hear more?

For pensioners

We have started to review pensions. This is a big undertaking as there are thousands of pensions to review and we are writing to people in stages, starting in Spring 2022. We hope to contact everyone affected by Summer 2024.

Please note that we are only contacting you if you are due a pension increase, a one-off additional payment or both however small. When working out whether you are due a pension increase in the future, we will also check that we are treating benefits equally for men and women (making up for unequal GMPs if and when appropriate).

We will provide updates in this section of the UKRF website and in future newsletters.

For active members and deferred members

We will review your pension when you start taking your pension. Then, when working out whether you are due a pension increase in the future, we will also check that we are treating benefits equally for men and women (making up for unequal GMPs if and when appropriate).

Similarly, we will review your pension if you transfer your benefits out of the UKRF. See question 22 for information about transferring out.

We will provide updates in this section of the UKRF website and in future newsletters.

For anyone who has transferred in or out of UKRF

We’re working through the implications of the High Court judgment in November 2020 on how to treat transferred benefits as part of our GMP review.

We will provide updates in this section of the UKRF website and in future newsletters. See question 8 for further information.

20. Are all the increases and payments to members broadly similar?

While we expect the changes for many members to be modest rather than large amounts, the results will differ for most people affected. GMP is a complex benefit. Among other things, it is linked to your age, sex, period of Scheme membership and earnings at the time, and was treated differently for men and women. As a result, the change to your benefits following our review is unlikely to be the same for your former colleagues, even if you worked at Barclays around the same time, or were in similar roles.

21. What if I am due to retire?

Where possible, we will continue to pay benefits without any adjustment, until we are in a position to calculate if they need to increase. We will then let you know if any additional payments become due.

We will provide updates in this section of the UKRF website and in future newsletters.

22. What if I want to transfer out my benefits now?

Since 1 January 2020, most transfer quotations have been prepared so that, if you are entitled to an adjustment for GMP equalisation, the cash equivalent value of your benefits takes it into account.

If your transfer quotation does not take into account any GMP equalisation adjustment you might be entitled to, we make this clear in the paperwork.

We will provide updates in this section of the UKRF website and in future newsletters.

23. What if I have any questions?

If you have any questions when we contact you, there is support in place to help you:

• Have you looked at our videos on the background and what we are doing?
• This FAQ section answers lots of your questions
• Your summary statement and a detailed statement showing a year by year breakdown of your GMP equalisation calculation are on ePA
• You can contact the Barclays Team

Impact on UKRF

24. Could the outcome of the hearing affect the funding level of the UKRF?

Yes. Inevitably, some benefits will need to be increased and all schemes reviewing pensions for unequal GMPs will have to meet the cost of paying these higher benefits. The UKRF has already allowed for these expected costs in our funding.