UK defined benefit (DB) pension schemes may need to top up historic transfers by an estimated £1.5bn due to guaranteed minimum pension (GMP) equalisation, analysis from Buck has revealed.

The group estimated that there were over 40,000 past transfers, representing a total of £40bn in transfer payments, which will need to be equalised.

This follows last year’s High Court ruling that pensions schemes will need to revisit individual transfer payments made since May 1990 to check if any additional value is owed as a result of GMP equalisation.

The ruling was described at the time as a "significant challenge" for the pension industry, with research revealing that 40 per cent of UK pension schemes were keen to move quickly on GMP equalisation of historic transfers.

However, further analysis from Buck has suggested that the scale of the problem may still be growing, with a survey of around 300 pension professionals revealing that over one third of schemes are still paying unequalised transfers.

Considering this, Buck warned that a “significant” number of schemes are continuing to add to the amount of GMP equalisation work they will face in the future.

Buck principal, Mark Williams, said: “The challenge that lies ahead for schemes should not be underestimated. Undertaking GMP equalisation was already shaping up to be a complex, costly, and time-consuming task, and the latest High Court decision has only added to the workload of UK schemes.

“For many schemes, even just locating the affected individuals will be a challenge. Over the last decades, former scheme members may have moved, changed their name, transferred again into a new scheme, or even died. In some cases, trustees may have little more information to go off than the name of a scheme member and the year they transferred.

“Despite the difficulty of the task, schemes should not delay in facing it head on. Trustees need to act now to avoid prolonging the process and creating future problems for themselves."

He continued: “The first step should be to start building a GMP equalisation plan and begin collating the necessary data, as indeed we have already started to do at Buck in partnership with our clients.

“Whatever approach trustees decide to take, it’s vital that they begin making reasonable progress now to ensure that they are not opening themselves up to a potentially costly and damaging legal challenge later.”

Buck has also updated its GMP equalisation solution, Square, to allow for GMP equalisation on historic transfers as a separate add-on feature.

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