Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill — House of Commons, 2022-02-25
Topic: Labor
Margaret Ferrier (Scottish National Party, Centre-left): I thank the hon. Member for her intervention and I absolutely agree. This Bill is set to remove those uncertainties so that these occupational schemes can get on with the equalisation process that they have always known they should be carrying out anyway The Bill removes the text in the Pension Schemes Act 1993 that sets out what survivor benefits following GMP conversion must look like, and replaces it with a power to set out those conditions in regulations. When this provision was discussed in Committee, I asked the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman) to confirm that the Government would consult on the content of those regulations. I am pleased to say that he agreed to that Before converting GMPs, pension schemes are required to get the consent of the sponsoring employer that funds the scheme, which might look to be reasonable, considering that the sponsoring employer has invested a lot of money to ensure that scheme members receive a decent retirement income. Unfortunately, it is not that straightforward, because current legislation does not account for all possible situations, such as where the original sponsoring employer is no longer in business. Again, the Bill removes the requirement for employer consent in the Pension Schemes Act 1993 and replaces it with a power to set out in regulations the details of the relevant persons who must consent to the conversion. I am again pleased to say that the Minister confirmed in Committee that the Government would also consult on the content of those regulations Finally, the Bill removes the requirement that pension schemes have to notify Her Majesty’s Revenue and Customs when they carry out a GMP conversion exercise. In Committee, the hon. Member for Reading East (Matt Rodda) very reasonably asked what checks would be in place if HMRC no longer had to be notified that people’s GMPs have been converted into other scheme benefits. I would like to reassure the hon. Member that the removal of the requirement that a scheme must notify HMRC if it converts GMP rights into other rights was requested by HMRC. The notification requirement was not a check by HMRC on whether an individual scheme had carried out a GMP conversion correctly. Responsibility for the accuracy of the conversion lies with the pension scheme’s trustees, and they must take advice on certain matters from the scheme actuary The requirement to notify HMRC if a conversion has been carried out is simply a legacy of the time when members of occupational pension schemes paid a lower rate of national insurance if they were contracted out. Because both the employer and the scheme members were paying lower national insurance contributions, HMRC used to need to keep detailed records of all contracted-out schemes. However, when contracting out ended for all occupational pension schemes in April 2016, with the introduction of the new state pension, employers and members no longer paid a lower level of national insurance. HMRC therefore no longer needs to be notified As this information is no longer required by HMRC, from 2019 it has said to schemes that it no longer requires them to notify it if GMP conversion has been carried out. However, because it is still a requirement of the Pension Schemes Act 1993, schemes should normally still submit such information to HMRC, despite its having no use or need for it. As I said, it costs schemes time and money to notify HMRC, it costs HMRC time and money to process the notifications, and there is no need beyond the current requirement in the 1993 Act for any of this time and money to be spent I reiterate to the House that the Bill does not impose any new costs or requirements on occupational pension schemes or their sponsoring employers. As I said, affected schemes have known that they need to equalise pensions for the effect of GMP for many years, and they should have been planning for equalisation. The Bill will simply help pension schemes that decide to use GMP conversion to do what they need to do to ensure payments are fair. I have engaged positively with representatives from the pensions industry, who have long called for these changes and welcome the Bill’s provisions. I am extremely pleased and proud that my Bill will help schemes that want to use GMP conversion to correct for the effects of this issue, and I am delighted by the cross-party support I have received so far and again today.