Clause 14
Pensions Bill
9:10 am
James Plaskitt (Parliamentary Under-Secretary, Department for Work and Pensions; Warwick and Leamington, Labour)
I thank my hon. Friend for that point. Over time, as the two-tier system has evolved, there has been considerable representation from across the industry urging us to achieve the simplification. As she knows and as I said, when Pickering looked at the issue during his review, he recommended such changes. What has been composed here is very broadly welcomed by the industry, subject to one or two caveats, which may have been raised earlier but to which I will come shortly.
I will explain the most significant provisions, beginning with those designed to protect the members’ interests during the conversion exercise. First, as I said, the scheme must maintain actuarial equivalence, which means, put simply, that at the date of conversion the value of the scheme benefits being offered must be the same as, or better than, the value of the GMP being given up. Then, if the scheme converts a pension already in payment, the amount of that pension immediately after the conversion must be no lower than the pension currently in payment. The clause provides trustees with power to amend their scheme rules, if necessary, to allow for the GMP conversion.
The power has two restrictions. First, the scheme must continue to have a defined-benefit structure—it cannot change the basis of the scheme to defined contribution. Secondly, at present, where the member dies, his or her surviving spouse or civil partner can inherit a part of the deceased member’s GMP; the position of a survivor after conversion must be broadly the same as it would be if the scheme had not converted the GMP.