A new ruling by the High Court means that trustees of defined benefit (DB) pension schemes must revisit and equalise guaranteed minimum pensions (GMP) for historic transfers.
The new judgement, issued on 20 November, ruled that Lloyds Banking Group pension scheme trustees are legally responsible for equalising the GMPs for the employees who transferred out of one of its DB pension schemes.
The ruling means that organisations should revisit historic cash equivalent transfer values (CETV) that were previously not equalised, and top up where necessary. The judgement does not force organisations to actively correct all pensions transfers, however, employers may look to do so to avoid legal proceedings from members affected.
Danyal Enver, associate at Arc Pensions Law, said: “As a result of the Lloyds judgment that came out [on 20 November], trustees of pension schemes that have transferred out to other pension schemes have breached their duties where the transfer payments were not equalised for GMP. This means that members can successfully claim against the trustees of the transferring pension scheme and the receiving pension scheme and claim a top-up payment to reflect the shortfall.
“However, the judgment does not require the trustees to proactively make these corrections to previous transfers. As a result, they do not have a set roadmap to resolve their breach, but they do not have any obligation to do anything following this judgment. Trustees can now decide if they want to remain with the uncertain possibility of unknown liabilities arising from members’ claims, or if they want to take a complex, costly path to certainty by calculating and settling those liabilities now.”