The DWP has published the Government’s response to the consultation conducted in respect of the Occupational Pension Schemes (Contracting-out) (Amendment) Regulations 2009 (the Regulations). The proposed Regulations will have the effect of permitting the trustees of defined benefit (final salary) contracted-out occupational pension schemes to convert their scheme’s Guaranteed Minimum Pension (GMP) liabilities into ordinary scheme benefits which are of at least equal actuarial value. The Regulations would also permit conversion of an individual's GMP on transfer out of the scheme, with the individual's consent.
The response sets out the Government’s position on:
- allowing GMPs to be converted whilst retaining the requirement to provide survivor benefits;
- the roles of the trustee and the actuary;
- the GMP conversion date;
- views on whether employers and trustees will use the GMP conversion facility;
- extending the scope of conversion regulations; and
- restrictions on onward transfers.
The Regulations are now to be laid before Parliament and are expected to come into force in either April or May 2009.
View the response (pdf)(68KB).
Comment: the intention of the Regulations is to simplify scheme administration by removing the need to track and monitor GMPs separately from other scheme benefits. While this streamlining may enable members to understand their scheme benefits more easily, there is no guidance on how schemes should deal with equalisation issues associated with GMPs, which could result in GMP conversion being impractical in practice.