DB pension schemes and advisers have been left unsure of how to proceed with pension transfers following the High Court ruling on guaranteed minimum pensions (GMPs), according to Royal London.
In October, the High Court ruled that Lloyds Banking Group must start the process of equalising the benefits for men and women in relation to the GMP, which could cost the bank up to £150m.
As a result, some schemes have put a temporary block on transfers while they assess what effect the decision may have and “re-write literature” accordingly.
Other schemes have reportedly talked about putting a long-term hold on DB pension transfers, although this “may be of dubious legality” according to Royal London director of policy, Steve Webb.
“The recent ruling in the Lloyds Bank case has created real confusion among pension schemes and those who advise them,” he said.
Some schemes and their advisers have adopted a “business as usual” approach, in which they will carry on with existing transfer values, but recognising that these may only be “partial transfers” because an “uplift may be worked out later”.
However, others have been advised to adopt an “ad hoc uplift to transfer values” for the time being as an approximation for GMP equalisation uplift, in the hope that “no-one will come back and challenge it”.
Webb continued: “We urgently need the authorities to give a clear steer to schemes as to how they should respond to the court ruling and how they should go about equalising for the effect of differences in GMPs between men and women”.
It is thought that the decision could have far reaching consequences after the cost of equalising GMPs across the board could be as much as £20bn.
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