GMP Equalisation and Trivial Commutation
Following the High Court ruling on the 26 October 2018 regarding the equalisation of contracted out benefits to reflect inequities in retirement ages between men and women, the Trustees are unable to process any trivial commutation requests for members with GMP.
A trivial commutation is where a small pension can be converted to a one off lump sum (subject to certain eligibility criteria set by Her Majesty's Revenue and Customs (HMRC)).
Trivial commutations have been suspended as the payment is meant to fully extinguish a member’s benefit in the scheme when the payment is made and the GMP equalisation could result in an increase in a member’s benefit and therefore the requirement for a further lump sum payment. In addition, the equalisation could take the member over the level of pension required to be eligible for the one off lump sum.
If payments are not processed correctly (i.e. as a single payment and when the pension value is less than the maximum allowed to convert to a cash sum) they would be considered by HMRC as an unauthorised payment and there could be significant tax consequences for both the Scheme and the member of making these payments.
We will keep members informed of how GMP equalisation progresses and whether benefits will be amended.