consultation on conversion of guaranteed minimum pensions
(GMPs)
The DWP has published a consultation paper on draft
regulations that specifies how schemes can convert GMPs into
ordinary scheme benefits. The aim of such conversion would be to
streamline the benefit structure of schemes and simplify the
accompanying administrative processes.
According to the draft regulations it would be possible to
convert GMPs, and thereby avoid some of the complications that
arise, so long as the scheme actuary certifies that the benefits
post-conversion are "actuarially equivalent" to those
pre-conversion.
Whilst this sounds attractive for contracted-out schemes, the
process is not straightforward and, in our view, potentially raises
more problems than it solves.
Also, the draft regulations do not specifically address the
question of equalising GMPs for men and women. They only provide
that the overall pension based on rights accrued from 17 May 1990
must be equal for men and women. This may store up problems for
schemes because if, at some future date, the decision is taken that
GMPs must be equalised, the consequence is likely to be a lot of
unravelling of converted benefits.
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