Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill

Tom Randall Excerpts

2nd reading
Friday 26th November 2021 Commons Chamber

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I beg to move, That the Bill be now read a Second time.

First, I want to congratulate the right hon. Member for North Somerset (Dr Fox) on the progression of his Down Syndrome Bill, which I very much support.

My Bill makes changes to the legislation governing the way occupational pension schemes can convert guaranteed minimum pensions into other scheme benefits. The Bill is very technical looking, but it is extremely important. It will help occupational pension schemes to correct a basic issue of men and women being treated differently in those schemes because of the impact of having a guaranteed minimum pension. It will help enable pension schemes to ensure that people do not receive less pension income than they would have received if they had been the opposite sex. In other words, it will help schemes to correct a situation that has been judged since 1990 to be fundamentally unfair.

Guaranteed minimum pensions, or GMPs, are the minimum pension that certain occupational pension schemes have to provide to their members. This applies to occupational pensions contracted out of the additional state pension between April 1978 and April 1997. It ensures that members receive a broadly similar amount of pension income in retirement as they would have received had they not been contracted out.

However, guaranteed minimum pensions differ for men and women, reflecting historical differences of treatment in the pension systems based on sex. People with the same employment history can have different amounts of guaranteed minimum pension depending on whether are men or women, even if they do exactly the same job for the same time at the same salary. It is not even as straightforward as men getting higher guaranteed minimum pensions than women; in fact, both men and women can lose out on pension as a result of their sex.

Successive UK Governments have made it clear since 1990 that occupational pension schemes need to equalise pensions to correct for these effects of guaranteed minimum pensions. In 2018, a High Court judgment confirmed that occupational pension schemes must equalise pensions to address these differences. Speaking as someone who has worked and built up occupational pensions of my own, it seems wrong that people can lose out on even a small amount of pension income purely because of these differences. Occupational pension schemes are therefore required to do something called equalisation—going back and correcting people’s overall pension to ensure that it is not lower than it would have been had the person been of the opposite sex.

[Tom Randall (Gedling) (Con)]

I thank the hon. Lady for bringing the Bill forward. She is talking about the history of this technically complex issue, which goes back to 1990. Does she agree that the changes introduced by the Bill are well overdue and that, by bringing it forward, we will get the change that we should have had a long time ago?

--- Later in debate ---

[Tom Randall (Gedling) (Con)]

As legislators, we look at the proposed legislation before us when we are preparing to speak in debates. As I was preparing to speak in the previous debate, I picked up the Down Syndrome Bill and, from the face of the Bill, was able to very quickly glean what it was about and understand its general thrust. As I picked up this Bill to prepare, however, I read that

“GMP conversion” means—

(i) the amendment of a scheme in relation to an

earner who was alive immediately before the

conversion date so that it no longer contains the

rules specified in sections 13(1)(a) and (b) and

17(1)”.

I am glad we have got that cleared up. So I congratulate the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) on not only introducing the Bill, but bringing it to life and explaining it in a way that this pensions layman was able to understand. I feel that I have made much more progress in the last half an hour than I have in the last few days of trying to get to grips with the Bill.

As I understand it—as I say, I claim to be no expert in this field—what we are seeing today is the end of a very long journey towards equality which we should have addressed before now, but better late than never. As I understand it, the old state pension had a number of elements to it, including a contracted-out part where one could obtain an occupational pension scheme that had a guaranteed minimum pension. Because of the way that the guaranteed minimum pension was calculated, there were various inequalities, including differentiation on a person’s sex and age as existed at that time. That has been corrected to some extent following the 1990 court case—it is bizarre that it has taken so long for us to get to this stage—but I understand that the industry has a number of concerns that are still extant with the existing legislation, including how conversion applies to survivor benefits, the element that can be inherited by a member’s widow. It does not provide for circumstances in which a scheme’s sponsoring employer no longer exists and cannot consent to a proposed conversion exercise, and also in terms of requiring schemes to notify HMRC that they have carried out the conversion exercise.

I understand that the Bill will

“Clarify that the legislation applies to survivors as well as earners.

Provide for a power to set out in regulations the conditions that must be met in

relation to survivors’ benefits.

Provide for a power to set out in regulations detail about who must consent to the conversion.

Remove the requirement to notify HMRC.”

It is a technical piece of legislation, but it will, I hope, bring us to the end of a long road. I congratulate the hon. Member for Rutherglen and Hamilton West on introducing it and explaining it so cogently to us laymen, and I look forward to seeing it on the statute book very soon.