The Department for Work and Pensions (DWP) has published a consultation seeking views on the draft Occupational Pension Schemes (Contracting-out) (Amendment) Regulations 2009 (the draft regulations). These draft regulations set conditions for converting member’s Guaranteed Minimum Pension (GMPs) into scheme benefits. Defined benefit occupational pension schemes that are contracted out of the State system are required to provide a pension of at least a specified level, the GMP. Changes to be made to the Pension Schemes Act 1993 by the Pensions Act 2007 are intended to allow contracted out pension schemes to convert members’ GMPs into ordinary scheme benefits. This is provided certain requirements are satisfied including the requirement that “the post-conversion benefits must be actuarially at least equivalent to the pre-conversion benefits”. There is still a requirement to provide survivors’ benefits after a GMP conversion.
The changes to the Pension Schemes Act 1993 have not yet been brought into force. These draft regulations are intended to:
- specify how trustees should determine actuarial equivalence; and
- prescribe the circumstances and the periods that survivors’ benefits must be provided for after GMP conversion.
The consultation closes on 28 October 2008. Any conversion will not resolve any doubts about sex equalisation and GMPs.