GMP Equalisation Under the Microscope – Magnifying Tricky Transfer Issues

Human-ResourcesSince the first Lloyds judgment, trustees and sponsoring employers have, understandably, been focussing on some of the more straightforward elements of GMP equalisation (if there is such a thing). However, following Lloyds 3, some tricky issues have reared their head; employers and trustees are having to take a closer look at previous transfers and in many cases it feels as if this is raising more questions than it answers. PASA recognised some of these issues in its recent guidance; we examine a few particular issues below, which are causing a headache for trustees attempting to take the next step in their GMP equalisation project. Continue Reading

A Trustee-like Approach to Green Gilts? Guest Blogger and Trustee Corporation Director, Glyn Ryland, Shares His Views

Piggy Bank and ROI Return of Investment text on wood blocks

Governments can do many things to help tackle climate change. Insulation in older houses is in the news. New houses matter too. I know of a new housing estate, under construction now, with a gas boiler in every home. No heat pumps. No solar panels. Planning laws could be tweaked to make that impossible (or financially unattractive). But no such tweak has happened to date, although it is reported to be under consideration by the government.

Yet laws have been tweaked to put regulatory and other pressures onto pension scheme trustees to consider holding green assets. (Interestingly, pension scheme trustees, but not charity trustees.)

And now the government is helpfully addressing the new demand for green assets (which its regulations created) by issuing a green asset. The first “green gilts”, issued this month, were over-subscribed despite having, overall, a yield 1.5bp lower than the nearest equivalent traditional gilt. That’s the “greenium” which the sponsor of a DB scheme (or the member of a DC scheme – including most automatically enrolled members) would pay to the Treasury, in the form of a lower return for essentially the same asset.

For that recurring, annually-compounded price, what do they get?  (1) A green-tinted gilt instead of the equivalent gilt-edged gilt. (2) A slightly salved conscience.  (But only if they (a) are aware of, (b) understand, and (c) agree with, the investment decision that has been made at their expense.)

Fine, I suppose.  But… don’t low gilt yields make DB pension liability values appear higher?  Haven’t low gilt yields already resulted in many employers paying increased deficit reduction contributions? Hasn’t this hastened the end of DB pension provision and made annuities very expensive for DC members? So why would a DB trustee – or any trustee – buy a green bond, with an even lower yield?

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It’s Not All About Climate Change!


It’s Not All About Climate Change!

On 1 October 2021, new regulations came into force requiring larger pension schemes (starting with occupational schemes that have £5 billion or more of assets, plus authorised master trusts) to put in place appropriate governance, reporting and publication arrangements in connection with climate-related risks and opportunities. It is unusual for statute to direct trustees as to the extent of their fiduciary duties although when the legislation was going through Parliament, the government of course denied it was directing trustees how to invest their members’ money. These new requirements reflect the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This is a big change, which will apply to schemes with assets of £1 billion or more from 1 October 2022.  The government is keeping this under review and it is likely that the majority of schemes will be caught by the new requirements over the next few years, as the government continues to review the detail of the requirements. More information on the TCFD requirements is set out in our #How2DoPensions quick guide on TCFD Reporting.

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Good Things Come to Those Who Wait?


As far back as February 2019, I blogged that plans were afoot to strengthen the powers of The Pensions Regulator (TPR). The Pension Schemes Act 2021 (PSA21) has been a long time in the making. It was enacted some two years later, in February of this year and many of the proposed measures, which I considered back in February 2019, will come into force on 1 October 2021. It’s not quite your average tomato sauce (remember that advert – good things come to those who wait?), and it won’t bring good things to everyone, but it is designed to enable TPR to act with more speed and with more impact for the good of pension schemes generally.

So, what measures am I talking about? Well, if you are a trustee, it’s inevitable that you will have been hearing about TPR’s new powers at trustee meetings for the last year at least. If, however, you are an employer of a defined benefit pension scheme, chances are you have been busy with other more pressing issues over the last 18 months or so.

For those of you who aren’t quite up to speed, here is a recap of what will (and won’t!) be coming into force on 1 October.

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GMP Equalisation Under the Microscope – Scoping out the Journey


Shortly after the High Court’s decision now referred to as “Lloyds 3“, which considered the issue of guaranteed minimum pension (GMP) equalisation and the extent to which past transfers-out should be revisited, we published a summary of the decision and our initial reaction.

In this series of blogs, we have put under the microscope some of the key issues raised by the Lloyds 3 decision, including some of the unanswered questions and practical difficulties that trustees will face in tackling GMP equalisation issues. Because of the complexities involved, with the best will in the world the majority of trustee boards will find that it will not be practicable to fully address all the potential GMP equalisation risks facing their scheme. In this blog, we go from “microscope” to “telescope” and examine the steps trustees might consider taking to prevent this reality from interfering with their long term objectives for securing liabilities outside their scheme. Continue Reading

The Pensions Single Code – Scatter the Clouds

Rainy Grey Cloud

Getting started on a project is often the most difficult part. If I put off doing something (personally or professionally) the task looms over me like a little black cloud, and somehow that cloud seems to get bigger every time it enters my thought process. In a cartoon-like manner, the cloud starts to follows me around, getting darker and threatening rain. It then starts to multiply.

If you are a pension scheme trustee or a pensions manager, The Pensions Regulator’s (TPR) single code of practice could be something that is looming over you in a similar way. TPR’s interim response to its consultation was short and sweet. We know that TPR is dropping its proposed 20% limit on unregulated investments due to the unintended impact on some large pension schemes. We also know that it is reconsidering aspects of the Own Risk Assessment and it is exploring how the single code could be better presented for public service schemes. Additionally, we know that the single code is now expected to be laid before parliament in spring 2022 and to become effective in summer 2022. But the main thing that we know, is that there is a lot to do, and all schemes will need to assess where they stand in terms of compliance and plan how to fill the gaps. Juggling this with the many and varied other commitments that you have, means that it will be a long-term project. Continue Reading

GMP Equalisation Under the Microscope – Bulk Transfers Will Require Close Examination


The recent court ruling known as “Lloyds 3” answered lots of questions about the need to revisit past transfer payments, where those transfer payments had been calculated without taking into account the obligation to equalise benefits for the effect of unequal guaranteed minimum pensions (GMPs). However, the more we look at Lloyds 3, which focused on the obligations of the trustee of a number of pension arrangements connected with the Lloyds Banking Group, and try to apply it to the real life history of other schemes, the more we see the judgment has left pension scheme trustees with a number of unanswered questions.

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We’re Invested in What?


If you are a trustee, have you ever had one of those letters or emails questioning your investment strategy? I don’t mean questions about de-risking triggers, the security of counterparties or even strategic asset allocation queries, which are the stuff of trustee meetings. The type of enquiry I am referring to is the persistent member or activist (who are increasing in numbers in our experience) who is focused on the propriety of a scheme’s investment in either specific stocks, industries (fossil fuels are extremely popular for this sort of communication) or even countries (a Supreme Court judgment last year highlighted the sensitivity of the Local Government Pension Scheme (LGPS) to this type of exposure).

Such communications generally end with something between strong encouragement and a request to divest as soon as possible from the offending investment(s). Accepting that trustees generally do not have access to PR agencies or corporate affairs departments, what should trustees do when faced with such communications?

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GMP Equalisation Under the Microscope – Focusing in on Data Gaps


“Big Data” is a topic that is frequently referred to in the news.  The traditional definition of Big Data is data that contains greater variety, arriving in increasing volumes and with ever-higher velocity.  Whilst this definition isn’t typically of direct relevance to trustees of UK occupational pension schemes, it does have some application in the context of guaranteed minimum pension (GMP) equalisation.

Trustees are already grappling with scheme data in connection with the submission of data scores to the Pensions Regulator as part of their scheme returns.  In addition, data issues are high on many trustee agendas, for example, when addressing data security and data privacy obligations, or looking ahead to the information to be provided to pension dashboards.  Following the recent High Court decision on the issue of GMP equalisation and historical transfers – a ruling commonly referred to as “Lloyds 3” – trustees have a potential further headache regarding scheme data to deal with.

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Free And Extended COBRA Coverage Under The American Rescue Plan Act Of 2021: Update

Section 9501 of the American Rescue Plan Act of 2021 (the “ARPA”)[1] requires certain employers to offer free COBRA coverage to certain individuals between April 1, 2021 and September 30, 2021.  The ARPA provides tax credits to employers to offset the cost of the COBRA coverage.  The right to free COBRA coverage extends to some individuals whose right to COBRA coverage previously ended.

The original version of this blogpost, written shortly after passage of the ARPA, reviewed eligibility free coverage and extended coverage, how the tax credits work, and potential issues pertaining to insurance coverages.  On April 7, 2021, the Department of Labor (the “DOL”) issued guidance on the law in the form of “Frequently Asked Questions” and various model notices that can be used in connection with the law.[2]  This post reflects the DOL’s recent guidance.

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