GMP - to the penny or not to the penny - that is the question?

The regulator has recently updated its guidance on winding up and has stated that trustees should look to adopt a tolerance of £2 per week. They go on to say that the cost of reconciling members benefits to the penny would outweigh any benefit gained.

There is then the comment that this exercise takes a disproportionate amount of time and that bulk annuities scheme wind ups should not take longer than 2 years.

Well this is all very laudable but it is hardly news in the wind up world and there is nothing very radical about this statement.

Good Trustees and administrators have always had conversations about tolerance levels and set them to whatever is appropriate to the individual scheme in question. If there is anyone still trying to reconcile GMP’s to the penny then good luck to them but as a result winding up in two years will be completely out of the equation.

Finalising the reconciliation is also only one step in the wind up process, members’ benefits still need to reflect the newly agreed GMP. Although a task in the Trustees’ own hands, the complexity of integrating new GMP amounts with historical benefits, especially pensioner benefits, should not be underestimated.

There have been many studies and initiatives taken to try and speed up the reconciliation process but quite simply there is a lack of staff within the Nispi unit in Newcastle and until this is resolved then the process will be long and drawn out. Without any kind of tolerance this process will become more tortuous than ever.

It is also worth noting that GMP reconciliations should not only be restricted to schemes in wind-up.  All schemes that are closed to the build up of future benefits should take steps now to complete the GMP reconciliation process.  Otherwise trustees are simply storing up problems for the future.