Alasdair Mayes, Partner and Head of GMP Equalisation at LCP who helped draft the guidance said: “It’s really important that trustees address past transfers in a practical but robust way. The guidance explains the key issues and sets out practical solutions. In our experience the sums due to members are averaging less than 1% of the original transfer. That might sound small but it could be £1,000 or more for those that were disadvantaged.
“Not surprisingly we are seeing really high engagement when contacting former members, with 80% or more responding quickly when contacted. Paying the top-up as cash straight to the individual can simplify the process significantly but robust processes are required given the much higher risk of fraud than if the top up is paid to the original receiving pension scheme.”
John Cormell, Principal and Head of GMP Equalisation at Barnett Waddingham: ‘This is good guidance, allowing schemes to move ahead with confidence and pragmatism in order to equalise transferred-in benefits and start addressing top ups on historic transfers out.
“Thankfully it proposes that transferred-in benefits be equalised in the same way as main scheme benefits. However trustees will need to be firm in their convictions in order to avoid equalising twice – a possibility raised in the guidance.
“The guidance sets out the challenges faced by schemes in terms of the practicalities of data gathering, calculating the necessary top up payments and arranging or receiving payments. It offers potential solutions for some of these and sets out the questions that schemes should consider in order to map out their approach to equalising historic transfers out.
“There is no doubt that this will be a significant project over the coming months and years, but this guidance helps to give a clearer picture as to what this project will involve, noting it will likely require pragmatism in order to reach satisfactory outcomes for both current and former members.
“Interestingly it also opens the door to some creativity in settling top-up payments but as ever, tax and legal issues will need to be carefully navigated.’
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