Guaranteed minimum pensions (GMPs) are benefits earned between 6 April 1978 and 5 April 1997 under pension schemes which contracted out of the additional state pension and provided alternative top-up benefits under the scheme.
While no longer accruing, complex legal requirements such as revaluation and inflation protection continued to apply to GMPs which had already built up prior to 5 April 1997.
This GMP legislation created inherent differences between the treatment of comparable men and women, potentially in breach of equal treatment laws, primarily because men and women were entitled to take GMPs at different ages – age 60 for women and age 65 for men.
After many years of legal uncertainty over whether schemes were required to equalise male and female benefits to take account of GMP benefits the Lloyds Bank case in 2019 provided some much-needed guidance.

In Lloyds Bank the Court held that the pension benefits paid to men and women were “pay” for the purposes of European equal treatment legislation meaning that providing different benefits for men and women was unlawful.
Trustees were under a duty to adjust benefits in excess of GMP so that the total benefits of comparable male and female members were made equal

The Court held that the obligation to equalise benefits applied in relation to benefits accrued between 17 May 1990 and 5 April 1997
The significance of 17 May 1990 is that it is the date of the Barber European judgment which had established the principle of equal treatment of male and female pensions.

The Court considered four potential means of equalisation.
Method A: Equalise each unequal element of the male and female pension separately.
Method B: Provide the better of the male or female equivalent comparator pension benefits (as applicable) each year.
Method C: Provide the better of the male or female equivalent comparator benefits each year subject to accumulated offsetting (under C2 an allowance was made for interest on the adjustments).
Method D: a one-off calculation by the actuary of the higher of the actuarial equivalents of the unequalised male or female benefits (under Method D2 the GMP benefits were converted to ordinary scheme benefits after the equalisation calculation had been made).

The Court decided that methods B and C were permissible means of equalising GMPs.
However, employers were entitled to require employers to use method C2 as this would be consistent with a principle of “minimum interference”.
Method D2 (GMP conversion) was, in principle, a lawful method of equalisation but was not available in practice in this case as the employers had not consented to GMP conversion as required under the GMP conversion legislation.

Where members had been underpaid benefits in the past, the Court held that whether members could recover those underpaid benefits was dependent upon the pension scheme rules.
Under the rules of the pension schemes in question in the Lloyds case, generally beneficiaries would be unable to claim arrears beyond a six year look-back period.
However, there was no applicable statutory time limitation period applicable to a claim of this nature.

Employers and trustees should consider the approach they wish to take, in light of the Lloyds judgment, in relation to past pension payments that have been made in respect of pensionable service between 17 May 1990 and 5 April 1997.
The method for equalising future payments will also have to be considered.
The DWP, PASA and HMRC have all produced helpful guidance on GMP conversion that should be consulted by trustees and employers in determining their next steps.