UK court rules pension plans should be gender equalized
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UK court rules pension plans should be gender equalized

Britain’s High Court decided Friday that pension plans under the guaranteed minimum pension (GMP) scheme have been unequal due to sex discrimination, and these schemes should be amended to equalize benefits for those who have been affected.

The Court of Justice of the EU ruled in 1990 that pension benefits should be equal for men and women. Despite some changes in response to this decision, there has been a lack of clarity from the UK government about how to compensate for gender differences among employees who chose to use the GMP.

Until 1997, the GMP allowed employees to opt out of the State Earnings Related Pension Scheme (SERPS). Contracting out of SERPS reduced national insurance costs for both employees and employers. The expectation was that employers would provide pensions equivalent to state pensions.

Differences, however, emerged among pension schemes. Among these differences is the issue that GMP pension ages have been shown to result in unequal revaluations. Specifically, a woman is “entitled to receive her GMP at an earlier age (age 60) than a man is entitled to receive his (age 65).” As a result of these types of differences caused by contracting out from SERPS, final salary pensions are demonstrably different between men and women.

The court’s decision means that affected pensions will need to be equalized. The ruling includes an estimate from the Pensions Management Institute, which foresees “GMP equalisation costs to be in the region of £10-20 billion.”

Government guidance from the Department of Work and Pensions, which has previously drafted equalization plans, will be necessary for employees, pensioners, and businesses to determine the full impact of this new ruling.