The UK high court recently ruled that gender equalisation should not only apply to pension contributions, but to defined benefit (DB) transfers as well.
According to consultancy Buck, this means that pension schemes will need to revisit around 400,000 historic transfers from between 1990 and 1997 to implement guaranteed minimum pension (GMP) equalisation.
That number could be set to grow, however, as the firm found that 36% of schemes continue to make “unequalised transfers”.
Overall, Buck estimated that trustees will need to fork over approximately £1.5bn ($2bn, €1.7bn) to top up transfers that were not equalised.
International Adviser reached out to industry to find out if financial advisers can play a role in helping their female clients get what is owed to them.
Complex calculations
Steve Webb, partner at LCP; Steven Cameron, pensions director at Aegon; and David White, managing director of QB Partners, all agree that there isn’t much advisers can do when it comes to calculating equalisation for their clients.
Webb said: “GMP equalisation is a highly complex issue and many pension schemes have not even decided how they plan to equalise. At this stage, there is probably little added value in advisers trying to undertake complex calculations, not least as many GMP adjustments will be for relatively small amounts.”
Cameron added: “This is an extremely complex area with different schemes affected in different ways, depending on their rules and benefits. It is only the trustees, under advice from the scheme actuary, who will be in a position to determine how much of a top-up an individual who has transferred may be entitled to.
“As Buck highlights, there may be some individuals who have transferred who the trustees may have difficulty tracing.”
But this does not mean advisers are unable to help in other ways.
White said: “For those transfers which are non-statutory or rules-based, financial advisers may have a responsibility in bringing a member’s attention to the fact that they may have a claim and then in assisting them in making the claim, although legal input is also likely to be required.”
A sentiment with which both Webb and Cameron agree.
“Advisers could seek to identify clients who have transferred out of DB schemes in the past and who have service in the relevant period, and could support them in writing to DB schemes encouraging trustees to address this issue,” Webb said.
With advisers raising awareness on the issue of gender equalisation for DB transfers, Cameron added, “those individuals should then make sure the trustees have their current contact details”.
“Where an adviser is currently advising on a DB transfer, they will want to be clear on whether or not any transfer quote allows for GMP equalisation.”
