DWP consults on GMP conversion regulations and fixed rate revaluation

The Department for Work and Pensions (DWP) has launched two consultations relating to Guaranteed Minimum Pensions (GMPs). The first seeks to clarify and amend the statutory conditions for GMP conversion, while the second concerns the fixed rate of GMP revaluation for members who leave pensionable service on or after 6 April 2027. Both consultations close on 29 October 2026. No implementation date has been proposed for the GMP conversion changes. If taken forward the conversion proposals could make aspects of the process more workable for trustees considering bulk or at-retirement conversion exercises.

GMP conversion: annual certification for at-retirement conversion

GMP conversion requires the scheme actuary to certify that the actuarial value of a member’s post-conversion benefits is at least as great as the value of their pre-conversion benefits. For a bulk conversion exercise, the necessary actuarial analysis and certification can generally be undertaken as part of the overall project, although this may still involve significant work. The existing requirement is more burdensome where members are converted individually as part of a business-as-usual retirement process. The DWP proposes that, as an alternative, the scheme actuary could certify the conversion process, rather than each individual conversion. The certified methodology would be expected to maintain the actuarial value of a member’s benefits and the actuary would specify the circumstances for further review. Each certificate would be valid for 12 months, meaning that the methodology and certificate would need to be reviewed, and renewed or updated as appropriate, at least annually.

These industry-backed changes could make at-retirement GMP conversion easier to administer. However, under the draft regulations, the new certification process would not be available for any cases where the trustees have already consulted members about GMP conversion unless the trustees consult them again . Without further consultation, those conversions could proceed only under the existing certification requirements. Schemes may challenge this aspect of the proposals, as requiring members to be reconsulted solely because the method of actuarial certification has changed could be regarded as disproportionate.

GMP conversion: survivor’s benefits

The DWP also proposes regulations under the Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022, which has not yet been brought into force. The regulations would clarify the minimum post-conversion survivor’s benefits payable following a member’s death.

The consultation also aims to simplify the circumstances in which a post-conversion survivors’ pension must be provided, while preserving protection for those who would qualify under the existing requirements. This change is likely to have limited practical effect for most private sector schemes, as scheme benefits for surviving spouses and civil partners are rarely restricted to the minimum prescribed by GMP legislation.

GMP conversion: employer consent

Current legislation requires the employer associated with each member to consent to the conversion of the member’s GMP in advance. DWP proposes instead that consent would be required from the scheme’s statutory employers, ie those subject to obligations concerning the funding of the scheme. In a multi-employer scheme, the statutory employers will also be able to nominate one of their number to provide consent on behalf of them all. This is a practical step forward in response to industry requests.

GMP fixed-rate revaluation

Where a member leaves pensionable service before GMP age (60 for a woman, 65 for a man) and the fixed-rate method applies, the scheme revalues their GMP for each complete tax year between leaving service and GMP age. The current rate is 3.25% for members leaving on or after 6 April 2022. Following advice from the Government Actuary’s Department, DWP proposes to retain that rate for members leaving between 6 April 2027 and 5 April 2032.

Separate HMRC consultation remains outstanding

HMRC has not yet responded to its separate summer consultation on the potential annual allowance implications for members where trustees implement GMP conversion before retirement. This is a distinct issue from the DWP proposals discussed above. We discussed the HMRC consultation in our article HMRC to address major obstacle to GMP conversion.