United Kingdom

Aon says new GMP equalisation guidance leaves some unanswered questions

LONDON (20 February 2020) – Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has commented on the latest guidance from HMRC on GMP equalisation.

Tom Yorath, partner and head of GMP Equalisation services at Aon, said:
“As expected, HMRC has dealt with some of the more straightforward issues which will allow schemes to press forward with equalisation with confidence. However, they have not yet addressed some of the bigger challenges for schemes that want to do away with GMPs forever through GMP conversion.

“For members who have yet to retire, HMRC has taken a relatively pragmatic view meaning that members should not lose transitional tax protections that they’ve applied for – and, in the main, these members will not have to revisit past tax disclosures.”

Tom Yorath continued:
“For members who have retired, the position is more complex. There will be a small subset of members for whom extra tax may be payable. These members will typically be those who have already paid a lifetime allowance charge when they retired.

“Admittedly, this is a small set of members, and revisiting these tax charges is a fiddly process. Many schemes will be concerned about the proportionality of building a relatively complex administration process - and performing recalculations for a large number of members - to deal with relatively small charges for a handful of people.

"For a number of schemes that we advise, this provides the much needed clarity required to implement equalisation – particularly for those proceeding with dual records approaches. However, the dozens of schemes queueing up to use GMP conversion will be disappointed that HMRC has ducked these issues. These schemes will now need to consider whether to seek alternative means to manage the challenges which remain."

 

About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

Aon UK Limited is authorised and regulated by the Financial Conduct Authority.

Registered in England and Wales. Registered number: 00210725. Registered Office:

The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.

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