The government has extended its interim solution for indexation and equalisation of guaranteed minimum pensions in public service schemes, and plans to look into the conversion method as an alternative during that time.
"The outcome of this consultation is that this solution will be extended for a further two years and four months," the Treasury said. "During this period, the government will investigate the possibility of an alternative long-term methodology, known as 'conversion'."
GMPs are remnants from the system of contracting out of the state earnings-related pension scheme. Employers paid GMPs to employees who were contracted out, and both paid lower national insurance contributions. With the introduction of the new flat rate state pension, contracting out ceased in April this year.
GMPs need to be equalised because in 1990, the European Court of Justice ruled pensions were pay and had to be equal between men and women. GMPs were previously calculated on the assumption that women retired earlier than men, and so accrued pension at a faster rate.
