GMP conversion

Occupational pension schemes may convert GMPs into ordinary scheme benefits, provided five stringent conditions are met.

Condition 1: Post-conversion benefits must be “actuarially at least equivalent to the pre-conversion benefits”.  The responsibility for determining actuarial equivalence lies with the trustees.
Condition 2: Ensures that any member who was entitled to payment of a pension immediately before the conversion date must not receive a lower pension post-conversion.
Condition 3: Prevents the GMP being converted into defined contribution benefits.
Condition 4: Requires the same survivor’s benefits to be attached to the post-conversion benefits as the pre-conversion benefits.  (Broadly, half of all GMP rights must be used to provide a survivor’s pension for a widow, widower or surviving civil partner.)
Condition 5: Focuses on procedural requirements.  For example, trustees will have to take “all reasonable steps” to consult affected members before going ahead with a conversion (unless the scheme is winding-up).  The sponsoring employer’s consent to conversion is also required.