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.|