The Pensions Administration Agency ("PASA") has recently published guidance addressing the tax issues around GMP equalisation and possible approaches for dealing with those issues (the "Guidance"). It is based on two GMP equalisation newsletters published by HMRC in the first half of 2020 which focus on the impact of benefit adjustments on the annual and lifetime allowances and the payment of past and future lump sums (see our previous blogs here and here) and aims to help schemes implement GMP equalisation projects in a 'proportionate and pragmatic way'.

Whilst the Guidance is a welcome tool to help scheme navigate GMP equalisation projects, it emphasises that it should not be interpreted as an endorsement of HMRC's approach or suggesting other approaches aren’t legitimate in appropriate circumstances. Schemes should continue to look to their professional advisers to help determine an appropriate approach for their scheme.

Unsurprisingly, the Guidance does not address the treatment of past transfers which were the subject of the most recent Lloyds Banking Group judgment, discussed in our previous blog, nor does it address in any detail the tax implications for schemes choosing to use a conversion method.

As we discussed in our webinar on the tax implications of GMP equalisation, a lack of certainty as to how pensions tax rules will apply where a conversion methodology is being used is one of the main barriers to schemes carrying out their GMP equalisation projects. Further guidance is expected from PASA in due course which will hopefully provide some much-needed clarity on these issues. We will provide a further update when this guidance becomes available.

If you would like to discuss anything raised in this blog, or if you have any queries about GMP equalisation, please get in touch with a member of the pensions team or your usual contact at Brodies.


Maureen Burns

Senior Associate