Gallagher research finds the majority of schemes considering buy-out have not yet equalised their Guaranteed Minimum Pensions (GMPs)*.
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Author: Callum Slattery

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FOR PROFESSIONAL INVESTORS ONLY

This article is a financial promotion and has been approved on 23/07/2025 by Gallagher (Administration & Investment) Limited, who is authorised and regulated by the Financial Conduct Authority.

Callum Slattery, Senior Risk Transfer Actuary at Gallagher, reflects on the additional challenges brought about by undertaking GMP equalisation whilst completing a buy-out transaction.

“Next on the agenda, GMP equalisation!” is still so often the sentence that trustee boards across the country dread to hear.

Since the landmark 2018 High Court ruling, trustees and advisers have tended to slow-pedal on GMP equalisation, not wanting to incur the fees of acting as ‘early movers’ on this complex, technical project.

The 2022 gilts crisis brought about new challenges for trustees – to put it lightly – and GMP equalisation naturally fell down the agenda as trustees grappled with more pressing funding and investment issues. Schemes that were able to navigate the gilts crisis successfully found themselves in much stronger solvency positions than had previously been the case. Buoyed by this good fortune, schemes rushed to be first in the queue to buy-in, still unequalised for GMPs. The unprecedented demand that followed for Bulk Purchase Annuities (‘BPAs’) in the UK broke records in 2023 (transaction volumes1) and 2024 (transaction numbers1) and shows no signs of stopping.

“But what about GMP equalisation?” I hear you ask. Great question! Many trustees are now in a position where they need to decide when and how to implement GMP equalisation against the context of an upcoming conversion to buy-out. A large, complicated project within a large, complicated project.

This article steps through my three key tips for Trustees in this position:

  1. Understand the additional considerations brought about by starting to undertake a buy-in before completing GMP equalisation
  2. Familiarise yourself with the requirements of your insurer
  3. Don’t forget the Lloyds 2020 ruling

1. Understanding the additional considerations

The additional considerations for trustees can be split into three main areas:

  • Assuming a conversion to buy-out is pursued, this will introduce a deadline and contractual obligation for completing GMP equalisation for members covered by the policy that didn’t previously exist
  • The contract will also impose additional data verification processes on the unequalised member data. This process can uncover inaccuracies in the data, which should be rectified before overlaying the impact of GMP equalisation. Trustees therefore need to time their GMP project carefully – ideally after some rounds of initial data queries with your insurer have taken place
  • Advisers will typically resource their GMP equalisation pipeline using a queuing system. It is essential that Trustees engage with their advisers as early as possible to ensure the project can be completed within the timescales required
  • Insurers will specify a preferred output for GMP equalisation that is linked to the original dataset for the buy-in. This won’t necessarily align with the output your administrator needs to update their systems
  • It is critical that trustees work with their buy-in broker, GMP equalisation provider, administrator and insurer to confirm the intended output is sufficient to meet the insurer’s data requirements
  • Insurers will also have preferences over the effective date at which equalised data is provided – this could be as at the inception date of the buy-in policy, or some later effective date such as the date GMP equalisation is implemented
  • Trustees should establish these parameters early and understand the costs and mechanics of what they are being asked to provide
  • Where GMP rectification (the process of correcting GMP benefits to align with HMRC records) is being combined with GMP equalisation, there may be different effective dates involved. Insurers will typically require rectified GMPs based on the data provided at inception date
  • There can be discrepancies between what your insurer requires and your adviser’s usual processes and these can have a cost impact. It is particularly important to understand this where there are cost pressures, or where there is sensitivity around the level of sponsor contribution that might be needed to transact the buy-in
  • One of the key drivers of additional costs is whether the insurer requires your administrator to implement GMP equalisation into their systems shortly before buy-out as part of the parallel payroll process
  • If this is a requirement, this may increase advisory costs of the GMP exercise significantly

Understanding these potential additional considerations is the first step in your GMP equalisation and buy-out journey. The next step is to have an open conversation with your insurer (or potential future insurers) to understand their requirements and determine whether they can offer flexibility if their standard approaches are causing you additional costs or risks.

2. Familiarise yourself with the requirements of your insurer

Insurers, like trustees, are still learning in this area. There are some key differences between the requirements and preferences of the active BPA insurers with regards to GMP equalisation. Some of the more established players have published guides to assist trustees in implementing GMP equalisation during the data cleanse. Others, like some of the recent entrants, may not yet have formal guides, but may have scope to be flexible to trustees’ objectives, and work with you to find a solution that works best for you and your advisers.

Gallagher has compiled a list of the key questions that we recommend are asked of your insurers in this area. Where possible, these should be worked into the selection process as a factor for comparison between providers. It is never too late to raise these issues though – and schemes that find themselves in the data cleanse window without a clear plan on GMP equalisation should endeavour to ask these questions as soon as possible.

Requirements Questions
Administration of methods Can your administrators deal with all the main methods? Do all methods result in an equal administrative cost to the trustees?
Data requirements Please clarify what data you need to see at inception date (rectified / equalised), and what data you would need to see at implementation date (rectified / equalised)?
Membership and flexibility Does the data required differ between membership type and what flexibility are you able to offer as part of the process?
Payroll implementation Do you expect the scheme to make the first equalised payroll to members, or is that something you will facilitate?
  • If the former, how many GMP equalised parallel payrolls do you require to be run?
  • If the latter, what flexibility can you offer trustees in terms of meeting back-payments and what back-payment data would you need to see from the trustees?
Buy-in specification Who is responsible for updating the buy-in benefit specification for GMP equalisation?

Going through this process is extremely valuable because it clarifies expectations for all parties, enables a better identification of costs and risks, and gives the opportunity for trustees to make sensible requests for flexibility if there is a rationale for doing so.

There is also a clear member communication benefit to this process. Even if your insurer may have agreed to pay GMP uplifts as part of their first payroll run, the responsibility for communicating changes to benefits with members will remain with the trustees. Establishing clear answers to the questions above will ensure that your final communications as a trustee board and the insurer’s first communications direct to members provide a consistent and reassuring message.

3. Don’t forget the Lloyds 2020 ruling

“But what about historic transferees? Don’t we have to do something for them too?” Quite right.

The 2020 Lloyds ruling set out that trustees must equalise certain historic transfers for the unequal effect of GMPs. By and large, there will be no overlap between the population of members covered by your buy-in and those former members impacted by the Lloyds 2020 ruling. However, there is a significant risk that not starting the Lloyds 2020 project early enough can lead to delays in any ultimate buy-out and wind-up project. Read more about the three key contributors to delays below:

In summary

Implementing GMP equalisation as part of a buy-out project is a complex affair. Navigating both will require:

  • An understanding of the additional considerations brought about by undertaking a buy-in before completing GMP equalisation
  • Familiarity with your insurer’s requirements
  • Holistic consideration, including the Lloyds 2020 ruling

So, the next time your adviser invites a discussion on GMP equalisation as part of a trustee meeting, don’t shy away from it. Following Gallagher’s three step approach should help you to control costs, mitigate risks and avoid ‘roadblocks’ in your journey to buy-out.

For more information on how Gallagher could help with your scheme in its GMP equalisation or Risk Transfer journey, please contact us.

Important notice: This article is for Professional investors only; it is generic in nature and should not be regarded as providing specific advice or a recommendation of suitability. No action should be taken without seeking appropriate advice. There can be no guarantee that the opinions expressed in this article will prove correct.

Author Information

Important notice

This article is for Professional investors only; it is generic in nature and should not be regarded as providing specific advice or a recommendation of suitability. No action should be taken without seeking appropriate advice. There can be no guarantee that the opinions expressed in this article will prove correct.

Sources

*From a Gallagher-led poll undertaken on its February 2025 webinar “GMP Equalisation and Bulk Purchase Annuities”, which indicated 90% of respondents in this position had not yet completed GMP equalisation.

1. Smith, Sophie. “Record 299 buy-ins completed in 2024,” PensionsAge, 21 March 2025.

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