The risk of delaying GMP equalisation
Smaller pension schemes delaying GMP equalisation may face rising costs, transaction delays and growing scrutiny as industry capacity pressures intensify, writes Aled Edwards.
Guaranteed Minimum Pension equalisation has been on the pensions industry agenda for years, yet for many small and medium-sized schemes it remains stubbornly stuck on the ‘to-do’ list.
Not because trustees do not understand its importance, or because sponsors are unwilling to engage. In many cases, the opposite is true. Trustees understand the legal obligations, the potential member impact and the implications for future de-risking activity. The challenge is capacity.
Demand for GMP equalisation work now significantly outweighs delivery resource across the pensions market, particularly for smaller and medium-sized schemes.
Administrators, actuarial firms and specialist providers are increasingly focused on larger transactions and schemes with higher commercial value, leaving many SME schemes facing extended timelines, rising costs and limited access to support.
As a result, GMP equalisation has become one of the most persistent unfinished projects in UK pensions, but delaying action is not without consequence.
The Pensions Ombudsman has already cautioned trustees against unreasonable delays, and unresolved GMP issues are increasingly becoming a practical barrier to wider strategic objectives, particularly for schemes considering buy-in, buy-out, or broader endgame planning.
Insurers want certainty. They want clean data, clarity over liabilities and confidence that historic benefit issues have been addressed appropriately.
Where GMP equalisation remains unresolved, schemes can face transaction delays, pricing adjustments, additional adviser costs, or reduced prioritisation from insurers operating in an increasingly competitive market.
In simple terms, schemes that are operationally ready are moving ahead. Schemes that are not are slipping further down the queue.
For many trustees, that creates a frustrating position. Schemes may have spent years improving funding levels, strengthening governance and preparing for de-risking opportunities, only to discover that unresolved GMP work has become a critical blocker at the point where timing matters most.
The irony is that the schemes most likely to struggle are often those least equipped to absorb further delay.
Large schemes typically have greater adviser resource and the scale to command market attention. Smaller schemes are competing for limited specialist capacity at a time when providers are understandably prioritising larger mandates and immediate commercial opportunities. That has created a widening imbalance across the market.
Some schemes are well advanced in implementation. Others are still trying to secure project resource or agree data requirements before meaningful work can begin. In many cases, trustees are caught between competing priorities, administrative pressures and limited adviser bandwidth.
The danger is that GMP equalisation becomes permanently deferred in favour of more immediate operational demands. But delay carries its own cost.
Every month that passes potentially means members continue receiving incorrect benefits, whether overpayments or underpayments. Trustees also continue carrying unresolved legal and operational risk on their scheme balance sheet.
There is also a broader governance issue. As schemes move closer to endgame planning, trustees are increasingly expected to demonstrate not simply awareness of GMP equalisation, but a credible pathway towards resolution. Regulators, insurers and advisers alike are becoming less sympathetic to indefinite postponement.
That does not mean every scheme must immediately launch a large-scale equalisation exercise regardless of cost or readiness. However, trustees should be able to evidence active consideration, proportionate planning and a realistic timetable for progression.
In response, many schemes are now exploring more pragmatic and phased approaches.
Rather than treating GMP equalisation as a single large project requiring significant upfront commitment, some are breaking work into manageable stages or prioritising schemes closest to transaction activity.
There is also growing recognition that smaller schemes may require delivery models specifically designed around their scale and resource constraints, rather than approaches built for much larger pension arrangements.
The wider market environment is unlikely to ease anytime soon. Buy-in and buy-out demand remains exceptionally strong, while administrative and actuarial resource across the industry remains stretched. Against that backdrop, schemes that continue deferring GMP equalisation risk finding themselves operationally constrained today, and strategically disadvantaged tomorrow.
Trustees do not need alarmism around GMP equalisation. What they do need is realism.
Unresolved GMP issues are no longer simply a historic technical complication sitting quietly in the background. They are increasingly influencing transaction readiness, governance expectations, member outcomes and strategic flexibility.
For schemes navigating the path towards endgame planning, the cost of delay is becoming harder to ignore.
Quantum Advisory has developed a GMPe service specifically designed to help small and medium-sized schemes beat the capacity crunch so they can complete their obligations and move forward with confidence - read more here or complete the form for a no-obligation fee estimate.
Aled Edwards is Partner and Head of Actuarial Strategy at Quantum Advisory. Click here to find out more.