Kelvin Wilson
GMP Equalisation (GMPe) is continuing to be a significant hurdle for DB pension schemes on the final stretch to buyout.
As bulk purchase annuity (BPA) transactions continue at pace, we’re seeing first-hand that an increasing bottleneck in a scheme’s journey to buyout is GMPe. Often avoided or deferred during earlier stages of transactions, delays in completing GMPe projects is creating additional uncertainty and costs to schemes and insurers looking to reach buyout.
The GMP equalisation logjam in the pension risk transfer market
GMP equalisation remains a complex and time-consuming exercise. It involves rectifying historical benefit calculations to ensure male and female members with equivalent service receive equal benefits - a legal requirement that dates back to the Lloyds case rulings in 2018. GMPe is a project involving data analytics, record reviews and non-trivial calculations. If done during a PRT transaction, GMPe is a complex project within an already complex transaction!
In recent discussions at industry events, GMPe was widely seen as one of the key factors slowing the path to policy issuance and scheme wind-up.
Advisers and insurers alike have pointed to a growing backlog of schemes unable to complete buyout transaction due to unresolved GMPe and related data issues.
Regulatory pressure and member expectations
As well as affecting scheme administration and governance, delayed GMPe projects has adverse implications for both member outcomes and regulatory compliance. The Pensions Ombudsman’s recent suggestion that schemes should no longer treat GMPe as optional or deferrable points to a shift in attitude. Failure to address GMPe can lead to incorrect benefit values being displayed on member communications or pension dashboards, potentially undermining trust and raising compliance concerns.
As value data becomes increasingly visible through the Pensions Dashboards Programme, schemes will need to ensure the benefit information they’re sharing is complete and accurate. That means as well as satisfying insurers and their appetite for risk during bulk-annuity transactions, resolving legacy GMP issues is also about meeting evolving expectations from both members and regulators.
Data quality and calculation complexity: the bigger picture
Of course, GMPe isn’t the only bottleneck. Across the market, schemes are facing growing pressure to deliver clean, validated data and accurate benefit specifications in formats that meet insurer standards. That includes managing multiple data templates, reconciling historic administration records, and applying complex actuarial factors for early or late retirement.
All of this is happening in a high-volume market, where more schemes than ever are transacting and insurer engagement windows are tightening. As a result, schemes that can’t meet the data and benefit requirements in good time risk delays, pricing uncertainty or even being deprioritised.
A tech-led approach to beating the bottleneck
Fortunately, there are solutions that use technology to enable schemes and advisors to work efficiently. They offer support in specific areas of data cleansing, data mapping and benefit calculations, including GMPe.
For example, Heywood has built a rules-based, low-code calculations engine designed to bring automation to and process complex benefit calculations at speed - the perfect antidote for tackling GMPe and other data-heavy calculations. We work with schemes and their advisors to identify and apply efficient technology to relevant parts of the bulk annuity and PRT process. As a result, this can lead to reduced time required to move from buy-in to buyout.
Insurers will also benefit. By reducing ambiguity and administrative friction, schemes can present a clearer, more complete picture of their liabilities, enabling for more accurate pricing and faster engagement, a competitive edge trustees might just be looking for.
Working in partnership to resolve GMPe challenges
Through considered integration of technology and partnerships, it is possible to relieve the bottleneck described at the start of this article. Technology solutions will support and complement the efforts of incumbent advisers, administrators trustees. Where schemes lack the capacity or bandwidth to tackle GMPe and data issues internally, bringing in specialist support can accelerate timelines without adding complexity.
As demand continues to rise in 2025 and beyond, this collaborative, tech-led approach may prove essential to keeping deals moving, and ensuring schemes are able to secure buyouts when market conditions are most favourable.
As the PRT market continues to surge ahead, the need for efficiency at each stage is real, but the barriers to buyout remain stubborn. GMP equalisation, data readiness and benefit specification challenges are now among the biggest factors slowing schemes down.
With the right tools, support and technology, these obstacles don’t have to derail transactions. By addressing GMPe early and investing in scalable, efficient data and calculations solutions, schemes can stay ahead of the curve, helping achieve the outcomes their members deserve.
