Margaret Ferrier MP’s Private Members Bill on the Conversion of Guaranteed Minimum Pensions (GMPs) passed its crucial second reading stage in the House of Commons on 26 November. More significantly, it received support from the Government, which increases the likelihood that it will make it to the statute book, much to the delight of those in the midst of GMP equalisation and conversion exercises.
The Bill was number 12 of the 20 Commons Private Members’ Bill ballot drawn for the 2021-2022 session. Only the top seven are guaranteed a full day of debate so it has done well to get this far. The Bill will now progress to Committee stage, probably early in the New Year.
The Bill makes several tidying up amendments to the GMP conversion legislation introduced in the Pension Schemes Act 1993 on 6 April 2009. Although the GMP conversion legislation has been in force for some time, it is only since the High Court’s judgment in Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank Plc and others in October 2018, and the subsequent publication of statutory guidance by the DWP in April 2019, that schemes have started to look to use it. In doing so, a number of uncertainties and impracticalities have been identified and it is some of these that the Bill seeks to address. Specifically, the Bill:
- Clarifies that the legislation applies to survivors as well as earners. Although Lloyds confirmed that the GMP conversion rules applied to both earners and survivors, the industry was concerned that the drafting should be clarified to expressly state this;
- Linked to the above, provides for a power to set out in regulations the conditions that must be met in relation to survivors’ benefits to be provided by a converted scheme;
- Provides for a power to set out in regulations detail about who must consent to the conversion. The current legislation requires employer consent to the conversion process, which then begs the question “which employer”? This is a particular issue in multi-employer schemes where the original employer(s) may no longer be in business or involved in the scheme. In those circumstances, it is not currently explicitly stated whether the principal employer’s consent will suffice;
- Removes the requirement to notify HMRC on or before the conversion date that the individual’s GMP will be converted.
In the 2019-21 session, only seven of 20 Bills from the Private Members' Ballot became law. Many Private Members Bills fall at Committee stage and the existence of low, yet complex, procedural and voting thresholds allow limited opposition to thwart popular bills. Let’s hope that given the Bill received universal support at its second reading in the Commons, with no suggested amendments, this one will have a smooth path to Royal Assent. Whilst the Bill will smooth the way for GMP conversion exercises to some extent, the industry would also welcome guidance from HMRC on the tax issues. I will leave you with my favourite quote from the debate which comes from Richard Holden MP:
“I am so glad that she [Margaret Ferrier MP] has introduced this legislation, because the subject of pensions is not talked about often enough in this House”.
Let’s hope that given the Bill received universal support at its second reading in the Commons, with no suggested amendments, this one will have a smooth path to Royal Assent. Whilst the Bill will smooth the way for GMP conversion exercises to some extent, the industry would also welcome guidance from HMRC on the tax issues.