London, 21 February 2020
Mercer welcomes HMRC’s new Guaranteed Minimum Pension (GMP) guidance on pension tax issues as a step in the right direction, but notes that a lot of questions are left unanswered. Although the guidelines cover some areas of tax relating to the Annual Allowance and Lifetime Allowance, the guidance falls short of addressing all areas required for scheme trustees and sponsors to make fully informed decisions. Most notably it does not cover GMP conversion nor allude to when it will address this issue. According to Mercer, this leaves scheme trustees and sponsors in a difficult position because HMRC has not fully defined some of the options theoretically available for equalising GMP.
In its Budget submission to HMRC, Mercer called on HMRC and the Pensions Minister to take urgent steps to clarify – and if required, amend – the law so that trustees are provided with the necessary information to allow them to pay pension scheme members their correct benefits.
Adrian Hartshorn, Senior Partner at Mercer and Chair of Mercer’s GMP Equalisation Steering Committee, said, “We have a once in a lifetime opportunity to make a real difference to the way pension schemes operate in the UK. Over the last 40 years, layer upon layer of complexity has been added to the way in which pension benefits are calculated and administered.
“As we implement GMP equalisation, we have an opportunity to simultaneously simplify benefits. This will help members understand their benefits, speed up processing times and reduce administration costs. This could reduce the additional costs of administering more complex benefits by £200m over the lifetime of pension scheme, ultimately putting members in a better position. Fifteen months after the Court judgment and almost 30 years after the original sex discrimination case there is still a lack of guidance from HMRC, which in turn prevents schemes from fully making fully informed decisions.”
Read more about GMP Equalisation here.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.