Clause 14
Pensions Bill
9:10 am
James Plaskitt (Parliamentary Under-Secretary, Department for Work and Pensions; Warwick and Leamington, Labour)
I welcome you to the Chair, Mr. Taylor.
The hon. Member for South-West Bedfordshire has helpfully introduced the clause and explained the purposes behind it. It is one of the Bill’s private pension simplification measures and is designed to remove some of the complexity that, as the hon. Gentleman said, has built up over time. It is a long clause, but we believe that it will achieve a straightforward and desirable end—reducing the administrative burdens on schemes and making it easier for their members to understand what they are entitled to. It is a reform that implements a recommendation of the Pickering review.
It will help the Committee if I provide a brief history and make some points in addition to those already contributed. The schemes involved are those that were contracted out of the state earnings-related pension scheme for all or part of the period 1978 to 1997. In order to contract out, people running those schemes had to ensure that the benefits offered were at least as good as the statutory minimum—the guaranteed minimum pension. However, a two-tier system developed over time and the GMP and the scheme excess now have different rules applying to different parts. That is too complex. GMP conversion will allow schemes to move to one set of rules. The clause will allow, but not require, the schemes to convert the GMPs of all or some of their members as long as actuarial equivalence is maintained.