Opperman promises GMP conversion tax fix

The bill, first tabled last year by Scottish National Party MP Margaret Ferrier, received cross-party support and completed its third reading in late February before moving to the House of Lords.

Ferrier said at the time that the aim of her bill was to clarify and streamline the process of GMP conversion, one of the more popular methods used by trustees to achieve GMP equalisation.

It was also intended to clarify the minimum survivor’s pension required, and to remove the need to notify HMRC when a conversion exercise had been carried out.

In a debate in February, shadow pensions minister Matt Rodda asked a number of questions related to the bill, which Opperman responded to in writing.

Rodda asked about the tax implications of GMP conversion. Opperman said HMRC had already published guidance on the issue, but because the tax position around conversion is “potentially more complex as that method can change the form of a member’s benefits and therefore its effects may have wider impacts”, he promised the government would “work closely with HMRC on the wider issues associated with the conversion method”.

The industry has previously called on HMRC to work on resolving questions around the tax implications of GMP conversion, which can trigger annual or lifetime allowance tax charges where a member's pension is uplifted.

He added that the removal of the requirement to notify HMRC of a conversion exercise had been requested by HMRC itself.

“This information is no longer required by HMRC and they have said to schemes they no longer require schemes to notify them if GMP conversion has been carried out. However, because this is still a requirement of the Pension Schemes Act 1993, schemes would normally still submit this information to HMRC despite HMRC having no use or need for it,” he explained.

Opperman reiterated that the bill itself merely clarifies existing legislation and tweaks some of the technical rules around conversion, but does not entail any significant change to legislation.

“Communication about a GMP conversion exercise is a matter for the trustees of the pension schemes. When the trustees of a scheme decide to use GMP conversion to convert GMPs into ordinary scheme benefits, they are required to take all reasonable steps to consult, in advance, with the people whose GMPs will be converted,” he explained. 

“They are also required to notify members and survivors who will be affected by the conversion either before or soon after the date that the conversion takes effect.”

He said it was for trustees to decide “how best they communicate GMP conversion in line with these communication requirements”. 

“We plan to use the consultation on the regulations coming out of the Bill to remind schemes of the need to communicate clearly with their members if and when they carry out a GMP conversion exercise.”