HM Revenue and Customs (HMRC) has formed a working group to consider the taxation issues arising from the equalisation of guaranteed minimum pensions (GMP).
The group was formed following a High Court ruling against Lloyds Banking Group’s pension trustees in October 2018 saying that they have a duty to “equalise benefits for men and women, so as to alter the result which is at present produced in relation to GMPs”.
At the time, global consultancy Towers Watson said the ruling had “potentially wide-reaching implications for most UK defined benefit schemes”.
HMRC announced on 29 March: “A working group is being formed to consider the pension tax issues arising as result of GMP equalisation.
“The group, which will be chaired by HMRC and include selected industry representatives, will work alongside other industry groups who are looking to address the wider issues arising from the equalisation of GMP.
“The first meeting of the group will take place in April 2019.”
It will take time
Industry professionals have criticised HMRC for the lack of promptness in tackling this issue – as it’s already been nearly six months since the ruling – because it will take a long time to resolve.
Peter Bradshaw, director of Selectapension, told International Adviser: “’The issue of GMP equalisation has been around for a long time and, even after the ruling in October, still remains unresolved for scheme members.
“It’s good that a working group has been formed to agree on the best method to resolve equalisation, though its nearly six months since the court case.
“It will take considerably more time to get a resolution, especially as the working party will include a variety of interest groups.
“Whatever the outcome, it will have wide implications for pension schemes and present them with huge costs, likely to run into billions.’’
‘At a snail’s pace’
The criticism was echoed by Steve Webb, director of policy at Royal London.
“HMRC are proceeding at a snail’s pace when it comes to resolving the uncertainties created by the ruling on GMPs before Christmas.
“There are savers at risk today of facing huge tax bills because a GMP adjustment invalidates their protection against lifetime allowance tax charges. Yet all we are promised is a new working group which has not yet started to meet.
“HMRC needs to appreciate that savers need to know where they stand and treat it with far greater urgency.”
In fact, IA reported last week that nearly 300,000 people had already surpassed the £1.03m ($1.34m, €1.2m) lifetime allowance limit and are facing a 55% tax charge on sums above that amount.
