Non-State Pensions Measures
Conversion of guaranteed minimum pensions
Current position
70.Sections 13 to 23 of the PSA1993 set out the requirements on contracted-out salary related occupational pension schemes to provide a guaranteed minimum pension to members contracted out of the state earnings related pension scheme through membership of occupational schemes between 6 April 1978 and 5 April 1997. From 6 April 1997 the requirements applying to contracted-out schemes were simplified and no further rights to guaranteed minimum pensions accrued from that date onwards.
Changes
71.In the White Paper, the Government proposed to introduce a facility for schemes to convert members’ rights to a guaranteed minimum pension into rights to an ordinary scheme pension, calculated under the scheme’s own rules, subject to certain safeguards to protect the members’ interests. Each member’s post conversion benefit would be required to be at least as actuarially valuable as their rights immediately prior to conversion.
72.By conducting a guaranteed minimum pensions conversion exercise, a scheme may be able to adopt a unified and streamlined benefit structure which will enable administrative savings to be made as well as offering advantages to members (in terms of understanding their rights in the scheme and being able to transfer them to other schemes more easily). It would be for scheme trustees to decide whether they wished to make use of this facility.
