The end of the tunnel is now in sight for GMP conversion rules
Draft regulations for the conversion of GMPs into other scheme benefits will streamline the process and could lead some schemes to reconsider how they are equalising pensions.
Yesterday (3 September), the Department for Work and Pensions (DWP) launched a consultation on draft regulations for GMP conversion – rules it said would provide certainty around the process and set out steps schemes must follow.
The DWP said the regulations would particularly help those schemes which plan to use the conversion methodology to fulfil their obligation to equalise people's pensions because of the impact of historic GMP rules.
Hymans Robertson head of GMP equalisation Matt Davis said this was helpful for industry and "could lead to some scheme's reconsidering whether to use GMP conversion to address GMP equalisation".
He said: "While it is more common for schemes to address GMP equalisation using a dual records method, GMP conversion provides an alternative route to remove all GMP related complexities from a pension scheme by providing scheme members with simpler benefits of the same value. Unlike the general trend of increasing complexity, GMP conversion can make pension schemes more straightforward to run in future."
LCP partner and head of GMP equalisation Alasdair Mayes agreed the regulations would streamline many aspects of the conversion process.
He said: "The legislation should be really helpful in making the process of equalising benefits simpler, faster and, for those applying GMP conversion at retirement, cheaper."
Mayes noted HMRC had also consulted earlier in the summer on regulations to remove the pensions tax hurdles associated with using GMP conversion for non-pensioners.
He said: "Taken together these two sets of regulations will be really helpful. It's been a long journey, but the end is finally in sight."
Despite this, he said one drawback was that it is proposed those that have already consulted with members on using GMP conversion but haven't yet applied conversion will need to re-consult to use the new regime.
Mayes added: "That hurdle I hope can be removed in the final regulations."
