The flexibility offered by guaranteed minimum pension conversions are a "goldmine" for advisers, according to a pensions expert and author.
Speaking at a Pensions Aspects Live conference in London yesterday (April 3) Mark Grant, partner and head of pensions at law firm CMS and author of The Pensions Ombudsman: Powers, Procedures and Decisions, said despite legislation being in place for ten years allowing GMP conversion "hardly anyone" has yet considered using it.
In October 2018, the UK High Court ruled that Lloyds Banking Group must equalise GMPs for men and women who had been contracted-out of the state pension between 1990 and 1997.
There are several ways to do this and the route of "conversion" is seen as a clean-cut approach and believed to be the preferred route for trustees and sponsors.
GMP conversion allows a scheme to convert its GMPs either for an individual member, a group of members, or the whole scheme into other scheme benefits.
Mr Grant said conversion was "on the face of it" very simple with clear advantages in comparison to equalisation and offering flexibility which could prove a "goldmine" for advisers.
He said: "You don’t just have to convert the GMP, you can convert whole benefits if you want and could in theory reshape the whole benefit.
"There is huge flexibility, you could remove all retail price index increases for the non-pensioners and put consumer price index in place instead, with a consequence uplift in the starting pension.
"You could do all sorts of creative things, this is a goldmine frankly for the adviser community."
Mr Grant added not all members need to be converted at the same time, stating instead one could reasonably "pick and choose" and do so in stages, and hailing conversion as a "potential big solution" to simplifying pension schemes.
Richard Gibson, partner and head of longevity risk transactions at Barnett Waddingham, who was also speaking at the event, said: "Equalisation is an activity where we do an exercise that will make the ongoing administration more complex.
"Conversion effectively will be an exercise which makes it simpler to administer the benefits afterwards. So I think the advantage of that is pretty clear from my perspective."
Mr Grant said conversion was a method he is "certainly considering in a lot of detail" for clients with complex schemes.
But Mr Grant said the benefits of GMP conversion could be a "long way off" in reality, if further legislation is needed in the area.
In January the Pensions Administration Standards Association (PASA) brought together representatives from across the industry to form a working group to advise on the equalisation of GMPs, following the Lloyd's ruling in October.
Mr Grant said: "It's possible when the Department for Work and Pensions and the working party come out with their conclusions on conversion they may say more legislation is needed.