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 However, the draft legislation will not be published until after the 5 January 2011 deadline has passed.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.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.