Historically, where a pension scheme which was contracted-out on a salary-related (COSR) basis calculated transfer values it would’ve done so on an unequalised basis (i.e. the transfer value wouldn’t have taken account of the need to equalise a member’s benefits for the effect of GMPs in respect of the Equalisation Period, where necessary). The value transferred may have been higher had the calculation reflected the need for GMP Equality.
Where a Receiving Plan received a transfer payment in respect of a member it would’ve provided the member with additional benefits. The style of additional benefits provided would vary between types of Receiving Plans and possibly between members within the same scheme. For example, where the Receiving Plan is a defined benefit (DB) scheme an individual may have been granted:
- an additional amount of pension (often a specified amount at retirement date)
- a service credit of additional years, or
- benefits which mirror those provided under the transferring scheme (this tends to be common on bulk transfers)
Where the transfer value included an allowance for a GMP and the Receiving Plan was a contracted-out salary related scheme it will have replicated the GMP (as notified by the Transferring Scheme) and agreed a GMP revaluation basis, usually in line with the Receiving Plan’s policy. Similarly, if the transfer payment included protected rights then these will have been converted into a GMP by the Receiving Plan if it was a COSR.
Transfers may have been the result of:
- an individual transfer – where a member requested a transfer value be paid from the Transferring Scheme to the Receiving Plan. Such individual transfers could be on either a statutory (Pension Schemes Act 1993) or a non-statutory (rules) basis; or
- a bulk transfer – under which the assets and liabilities relating to a class of members transferred from the transferring scheme to the receiving scheme, often without member consent (this typically happens as part of a scheme merger or following the sale of part of a business or corporate group).
Different considerations will apply depending on the type of transfer and the benefits provided.
Duncan Buchanan – Chair (Hogan Lovells LLP)
Stephen Scholefield (Pinsents)
Julien Smith (Just)
Tony King (Reach)
Tim Smith (Herbert Smith Freehills LLP)
Faith Dickson (Sackers)
Richard Akroyd (Willis Towers Watson)
Paul Charles (Isinglass)
Richard Gibson (Barnett Waddingham)
Rebecca Morgan (ITM)
Felicity Boyce (AON)
Alan Whalley (BCSSS)
Deborah Cooper (Mercer)
Heather Chandler (Shoosmiths)
Mark Riordan (Capita)
Peter Scott (Equiniti)
Alasdair Mayes (LCP)
Rebecca Shevill (AXA)