£8bn GMP costs half what previously thought

The cost of equalising guaranteed minimum pensions (GMP) is likely to cost almost half of the £15bn anticipated by the industry after the ruling, new analysis has found.

According to research by Hymans Robertson, the cost of equalising to pensions schemes is more likely to cost around £8bn, suggesting that most companies will not see “significant” disruption to their long-term funding strategies.

Following the High Court ruling last October, many in the industry believed that the cost to businesses would be in the region of £15-£20bn.

The cost to Lloyds, which took the case to the High Court, was thought to be around £500m, before the figure was quickly revised down to £150m.

Hymans Robertson head of GMP equalisation, Matt Davis, said: “It is really encouraging news for UK business that our more detailed analysis indicates that it will be closer to half that amount. This suggests that most companies will not see significant disruption to their long term funding strategies.

“While many financial directors will be relieved that the impact is not as bad as first feared, we‘ve seen noticeable differences from scheme to scheme. This means it is important to complete a thorough assessment, especially as this extra cost normally flows through ‘profit and loss’ in company accounts.”

As schemes come to terms with the process, many have estimated that it is going to cost between 1-3 per cent of their liabilities.

Despite this, Davis warns that it is still one of the biggest challenges facing the industry, as 28 years of pension records will need to be re-analysed.

Previously, the consultancy firm said that pension schemes should look to adopt the D2 method for equalisation in order to get favourable buy in and buyout pricing.

The survey found that seven out of eight insurers had a “unanimous” preference for pension schemes who opted for the D2 method, with six out of seven offering more competitive pricing to schemes who had used the method.

    Share Story:

Recent Stories


FREE E-NEWS SIGN UP

Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.


Helping the credit challenged get mortgage ready
A rising number of borrowers are finding it harder to access mortgages due to being credit challenged - whether that’s from historic debts, a county court judgment, or having little to no credit history.

In the latest episode of the Mortgage Insider podcast, Phil Spencer is joined by Eloise Hall, Head of National Accounts at Kensington Mortgages, and Alastair Douglas, CEO of TotallyMoney.


Inside the world of high net worth lending
The mortgage market continues to evolve, and so too does the answer to the question: what is a high net worth individual in today’s market? In this episode of the Mortgage Insider podcast, host Phil Spencer is joined by Stephen Moroukian, Head of Product and Proposition for Real Estate Financing at Barclays Private Bank, and Islay Robinson, founder and CEO of Enness Global. Together, they explore what brokers really need to know when supporting high net worth individuals.

The future of the bridging industry and the Autumn Budget
MoneyAge content editor, Dan McGrath, is joined by head of marketing at Black & White Bridging, Matt Horton, to discuss the bridging industry, the impact of the Autumn Budget and what the future holds for the sector.