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The Department for Work and Pensions is consulting on draft regulations about converting guaranteed minimum pensions into other scheme benefits. A separate consultation asks for views on continuing with a revaluation rate of 3.25% a year on GMPs for early leavers. Both consultations close on 29 October.
The proposed regulations on converting GMPs into other scheme benefits aim "to provide certainty around the process and steps schemes must follow" when conducting a conversion exercise. The regulations aim to help those schemes in particular which plan to use the conversion methodology to equalise people’s pensions because of the impact of historic GMP rules.
"The regulations set out in this consultation are the final step in the long journey towards correcting what is a long-standing inequality in the UK’s occupational pension system," said pensions minister Torsten Bell.
Bell said the regulations make changes to the rules on how schemes can convert GMPs because "government has continued to hear representations about schemes needing greater clarity and wants to be pragmatic".
The draft regulations expand on two provisions in the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022 and include a new provision that Bell said had been asked for stakeholders. Specifically, the regs propose streamlining the actuarial certification process for individual conversions, so schemes do not need to re-engage an actuary each time an individual conversion calculation is due.
With some schemes being in the middle of GMP conversion, the DWP is proposing a transitional arrangement under which those schemes that have started consulting their members at the time the regulations come into force would continue using the current legislation unless they decide to consult them afresh.
The other consultation published on Thursday, aimed primarily at administrators and employers, proposes keeping 3.25% per annum for fixed rate revaluation of GMPs for early leavers. This rate would apply to contracted-out members who leave pensionable service between 6 April 2027 to 5 April 2032.
The Government Actuary's Department had recommend a rate between 3% pa and 3.5% pa.
