Guidance

Guaranteed Minimum Pension (GMP) conversion and equalisation

Find out how to convert GMPs into other scheme benefits and equalise pensions to remove inequalities.

The Guaranteed Minimum Pension (GMP) rules were abolished from 6 April 1997. However, past accruals remain and a scheme that was contracted-out must still provide a pension at least as good as the GMP in respect of contracted-out service for any time a person was a member of that scheme, up to and including 5 April 1997.

There are specific rules relating to the accrual and payment of GMPs. These rules can create administrative difficulties for pension schemes which may have adopted different rules for other scheme benefits they pay, and also for schemes that have accepted transfers which include GMPs.

GMP conversion offers a means by which a scheme can convert its GMPs, either for an individual member, a group of members or the whole scheme into other scheme benefits creating administrative easements.

The legislation enabling GMP conversion is provided by sections 24A-H of the Pension Schemes Act 1993 (PSA 1993) and regulations 27 and 27A of the Occupational Pension Schemes (Schemes that were Contracted-out)(No 2) Regulations 2015 (the 2015 Regulations).

Equalising pensions for the effect of inequalities caused by GMPs

The legislative requirements for GMPs can give rise to a difference in treatment between men and women which schemes are required to address in accordance with their equal treatment obligations. The difference is due to the :

  • different ages at which men and women are entitled to receive their GMPs
  • different rates at which the GMP accrues for men and women
  • fact that schemes often provided for different rates of revaluation and or indexation on the part of the pension underpinned by the GMP and benefits above the GMP

Conversion can be used as part of a process by which schemes can remove any inequality between men and women resulting from the GMP rules. A proposed methodology can be used - but is not the only method available.

Schemes may choose this methodology or another. They are recommended to take their own legal advice when considering and undertaking equalisation.

GMP calculations

Schemes wishing to obtain individual or bulk GMP calculations to assist in converting GMPs can use HMRC’s GMP Checker service .

Published 23 January 2019