With effect from 6 April 2009, the Pensions Act 2007 allows trustees of defined benefit contracted-out occupational pension schemes to convert their GMP liabilities into ordinary scheme benefits, provided that the converted benefits are "actuarially at least equivalent to the pre-conversion benefits." The employer must agree to the conversion and the trustees must also consult affected members.
The DWP has published the draft Occupational Pension Schemes (Contracting-out) (Amendment) Regulations, due to come into force on 6 April 2009 which:
- Specify how actuarial equivalence must be determined in order to convert GMPs into scheme benefits under the 2007 Act. Broadly, trustees (on actuarial advice) are responsible for determining actuarial equivalence and for choosing the assumptions to be used.
- Set out the conditions under which, and the period for which, survivors' benefits must be provided post-conversion. Broadly, these are the same as the requirements for survivors' benefits in existing GMP legislation.
However, notwithstanding that many schemes may find it useful to streamline administration by opting to convert GMPs, many will be put off by continuing uncertainty as to GMP equalisation requirements.