UK: Pensions Radar

Last Updated: 19 January 2011
Article by Paul Stannard

Pensions Radar is a quarterly listing of expected future changes in UK law affecting work-based pension schemes. Please speak to your usual Travers Smith contact if you would like to know more about any topics.

Payments to employers

Key date

5 January 2011 (notice)

5 April 2011 (resolution

Trustees must pass a resolution to avoid running the risk of losing existing powers to make payments to employers. Such a resolution may be needed to allow a payment of surplus to an employer (and possibly other payments) to be made at any time after 5 April 2011. Three months' written notice must first be given to members and employers. For more detail, please see our Payments to employers briefing note.

The Government intends to ask Parliament to amend the law so that it would clearly apply only to payments of surplus from a scheme that is not in winding-up and to extend the deadlines by five years. However, the draft legislation will not be published until after the 5 January 2011 deadline has passed.

CPI to be the measure of inflation for revaluation and pension increases

Key date


CPI will replace RPI as the measure of inflation for the purposes of minimum requirements for the revaluation of deferred pensions and increases to pensions in payment. The impact on private sector occupational pension schemes will depend on the drafting of their revaluation and pension increase rules. Specific advice will therefore be needed.

Additional paternity leave to be available

Key date

3 April 2011

Additional paternity (or adoption) leave of up to six months will be available to new fathers by reducing the mother's additional maternity (or adoption) leave correspondingly. Up to three months would be paid by "additional statutory paternity pay" in place of maternity pay. Paid paternity leave must be treated as pensionable service in the same way as for paid maternity (or adoption) leave.

Transitional tax regulations cease to apply

Key date

5 April 2011

This is a key deadline, with potentially serious financial consequences if it is missed.

When the new tax regime came into force on A Day (6 April 2006), transitional regulations temporarily modified existing approved schemes so that some features of the old tax regime would continue to apply (e.g. old Inland Revenue limits and the earnings cap) until the scheme was amended and the regulations were disapplied. The regulations also had the effect that benefits that would be unauthorised payments under the new tax regime became discretionary. Schemes still relying on these transitional regulations must be amended before they cease to apply. This is especially the case where schemes rely on pre-6 April 2006 Inland Revenue limits and the earnings cap to restrict benefits.

Tax reliefs: reduced annual and lifetime allowances etc.

Key date

6 April 2011 (with anti-forestalling measures in place from 22 April 2009) and 6 April 2012

The Government is scrapping the provisions of the Finance Act 2010 restricting higher rate tax relief for high earners' pension savings. Instead, the annual allowance will be reduced from £255,000 to £50,000 from 6 April 2011 and the lifetime allowance from £1.8 million to £1.5 million from 6 April 2012. The factor for converting DB pensions into pension input for annual allowance purposes will increase, from 10 to 16, putting a higher deemed value on pension accruals. Trustees and employers will have new obligations to provide information. Trustees are likely to have to offer an option for high annual allowance charges to be paid out of scheme benefits. For more detail, please see WHiP Issue 22.

Because the change is not effective until 6 April 2011, high earners might try to make large pension contributions before then so as to get greater tax relief. The previous Government therefore included "anti-forestalling" provisions in the Finance Act 2009, whereby 20% tax (2009/10; 30% in 2010/11) is charged on the individual to take back the benefit of higher rate tax relief in certain circumstances. This can apply to any individual with gross taxable income (not including employer-funded pension savings) of £130,000pa or more. See WHiP Issues 10 and 12.

As an anti-avoidance measure, a new income tax charge and National Insurance contributions will apply from 6 April 2011 on contributions to a non-registered pension scheme (or "EFRBS") and similar arrangements. The scope of the draft legislation is currently unclear.

Compulsory annuitisation to be abolished

Key date

6 April 2011

The Government intends to end the requirement for individuals with DC pots to have secured a pension by age 75. Instead, they may take an unsecured pension with capped drawdown even after age 75. Uncapped drawdown will be permitted for individuals who can demonstrate that they have an annual pension income of £20,000. The restrictions on taking pension commencement, trivial commutation and value protection lump sums after reaching age 75 will be removed.

Transitional provisions, extending the period for securing a pension to the day before the individual's 77th birthday, apply to those reaching age 75 on or after 22 June 2010.

Compulsory retirement at age 65

Key date

6 April 2011

The Government will phase out the default retirement age of 65 for age discrimination purposes. There will be a transitional period for retirements before 1 October 2011 that are initiated before 6 April 2011. Employers may still operate a compulsory retirement age if this can be objectively justified.

Basic state pension increases changed

Key date

6 April 2011 (and 6 April 2012)

A "triple guarantee" will increase basic state pensions annually by the highest of increases in national average earnings, the retail prices index and 2.5%. From 6 April 2012, the consumer prices index will replace the retail prices index in this formula.

Employer debt regulations: further amendments

Key date

1 October 2011

The Government is considering comments raised on the employer debt regulations and may issue further amending regulations.

DC contracting-out abolished

Key date

6 April 2012

It will no longer be possible to contract out of the State Second Pension on a money purchase basis. This applies to both occupational and personal pension schemes. There will be a particular impact for defined benefit schemes that are contracted-out on a money purchase basis. Restrictions in respect of protected rights will cease to apply but schemes' protected rights rules may need to be amended. Transfers from schemes that are contracted-out on a salary-related basis to DC schemes will be permitted.

Automatic enrolment and NEST

Key date

From 1 October 2012

The automatic enrolment requirement of the Pensions Act 2008 is due to take effect but with transitional provisions. The National Employment Savings Trust (NEST) will also be available to employers. Stakeholder designation and access obligations will be abolished.

"Solvency II" Directive implementation

Key date

By 31 October 2012 (but deadline might be put back to 31 December 2012)

The EU's "Solvency II" directive is not expected to affect UK occupational pension schemes directly, but it may affect the cost of buying annuities and deferred annuities. In the meantime, the EU's "IORP" directive is being reviewed, with possible consequences for the funding of UK defined benefit pension schemes.

Record-keeping deadline

Key date

December 2012

The Pensions Regulator will expect trustees to have attained specified standards for member record-keeping and to have addressed any problems with member data.

EU "Portability" directive may come into force

Key date

1 July 2013

This directive is still in draft form and there has been difficulty in agreeing its terms due to the very different stances of EU member states as regards vesting. It may affect preservation requirements in the UK, if it is ever agreed and depending on its final language.

Combined state pensions

Key date


The Government is expected to announce an overhaul of the state pension system. Means-testing seems likely to be reduced or abandoned and the basic state pension and state second pension are likely to be amalgamated.

State pension ages to be raised

Key date

2016 onwards

Women's state pension age will be 65 by April 2020 and state pension age for men and women will increase in stages from 65 to 68 between 2024 and 2046. The Government intends to accelerate the increase in women's state pension so that it is 65 by November 2018. It also intends to bring forward the increase in state pension for men and women to 66 so that it happens in stages from November 2018 to April 2020. These changes may affect, for example, schemes that provide bridging pensions or that feature state pension offsets. Further acceleration of increases in state pension age will be considered.

State Second Pension (S2P) fully flat-rate

Key date

By 2030

Leading up to (approximately) 2030, S2P is gradually changing from being earningsrelated and will become fully flat rate.

The following are expected developments for which there is no fixed date.

Electronic disclosure of information

The Government will consider extending the new electronic disclosure facility to items required to be disclosed other than under the disclosure regulations.

Early access to pension savings

The Government is considering allowing early access to pension savings as an incentive to save or as a means to alleviate cases of hardship. This could be by way of a loan, withdrawal, early access to the tax free lump sum, or "feeder funds" combining ISAs and pensions.

Public sector pensions

An independent commission, chaired by John Hutton, is reviewing the long-term affordability of public sector pensions. An interim report has been published and the final report is awaited.

Sex-based factors for insurance and annuities

A forthcoming decision of the Court of Justice of the European Union may result in unisex actuarial factors being required for insurance and annuity contracts.

VAT for fund management

The challenge by the NAPF to HMRC's VAT treatment of pension schemes' investment management fees is to be progressed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Travers Smith LLP
Gowling WLG
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Travers Smith LLP
Gowling WLG
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions