Pension consultant Willis Towers Watson has warned that pension schemes could be forced to top up 100,000 historic pension transfer payments following a High Court ruling.
Some pension transfer clients could be out of pocket as much as £30,000, says Willis.
The High Court ruled last week that pension schemes should top up a number of historic pension transfer payments that may have been too low due to gender-based calculations.
The court said top-ups would be required where members who exercised their statutory right to transfer out received lower transfer values than they would have done had they been of the opposite sex.
Willis says that the anomaly occurred owing to statutory rules around the calculation of Guaranteed Minimum Pensions (GMPs) accrued between 17 May 1990 and 5 April 1997.
An earlier judgment, in October 2018, held that pension benefits accrued during this period must be equalised to compensate for the effect of unequal GMPs.
The judgment from Mr Justice Morgan relates to the Lloyds Banking Group Pensions Trustees Ltd vs Lloyds Bank plc and others case. It indicated that top-ups should correct the original transfer value calculation, with interest added, rather than reflecting how the basis for calculating transfer payments has changed in the meantime.
Colin Smith, senior director, Willis Towers Watson, said: “There have been over 250,000 transfers out of defined benefit schemes since ‘Pension Freedom’ took effect in 2015.
“Not all of these members will have had 1990-1997 GMPs and not everyone who did will be due a top-up, but the number of transfers in scope from this era alone could be approaching 100,000. While transfers before then were less common, the judgment does not apply a time limit, so transfers stretching all the way back to 1990 are in scope.”
“Top-ups will generally be quite a small percentage of the original payment, especially for higher earners. The average amount might be in the low thousands of pounds, but we have seen examples where the top-up could be as big as £30,000.”