UK: UK Pensions Update

Last Updated: 11 November 2008
Article by Robert West

Consultation on Guaranteed Minimum Pension conversion Regulations

Schemes are to be able to convert Guaranteed Minimum Pensions ("GMPs") into other scheme benefits, provided that after conversion they are at least actuarially equivalent.

Trustees considering GMP conversion would need to:

  • obtain employer consent and consult members;
  • request reconciliation of HM Revenue and Customs ("HMRC") National Insurance data with scheme records;
  • with actuarial advice, decide on actuarial assumptions for conversion;
  • decide whether to commute part, or all, of the GMP and whether to include all members;
  • ask the actuary to carry out the calculations and certify the actuarial equivalence;
  • amend the scheme to provide for conversion and remove any double benefit;
  • notify members and HMRC of the conversion; and
  • ensure survivor benefits are provided by the scheme in the same way as before conversion.

The Department for Work and Pensions (the "DWP") is consulting on the equivalence requirements, which are scheduled to come into force next April. The consultation paper queries whether schemes receiving transferred converted benefits should have to provide the same survivor benefits as the transferring scheme and whether GMP conversion should be extended to ill health and early retirement cases. However, the paper does not comment on the need to equalise GMPs or the impact this will have on the conversion.

Members taking a transfer out to another scheme will need to be informed of any loss of survivor benefits.

Conversion will be regulated by the Pensions Regulator.

The consultation paper can be viewed by clicking here.

DWP report on employer attitudes to risk sharing schemes

Following consultation, the DWP has issued a report on the attitudes of interviewed employers to risk sharing pension schemes.

Employers see difficulty in explaining to employees the entitlements and benefit structures of risk sharing schemes. Those with defined benefit schemes view risk sharing as being attractive to employers but less so to employees, as regards the flexibility to make changes to indexation, revaluation and pension age. Employers with defined contribution schemes feel risk sharing would introduce unwelcome risk and add administrative costs for them. The lack of guaranteed revaluation on deferred benefits and indexation on pensions in payment, and the ability to change pensionable age in line with changing longevity, are thought by employers to be vulnerable to legal challenge. The report suggests employers seem to have little appetite for risk sharing and there is no indication that it would help to keep open schemes that might otherwise close.

For risk sharing to be workable, significant changes to legislation would be needed, including redefining what constitutes an accrued right and a money purchase scheme, and perhaps introducing some form of actuarial equivalence value test to allow flexibility. Given that the risk is shared, it is possible that additional assets might have to be held above the scheme's technical funding provisions in order to comply with European law.

The report can be viewed by clicking here.

Regulator issues guidance on member communications

On 18 September 2008, the Pensions Regulator (the "Regulator") issued guidance on member communications, together with an investment guide that can be provided to members.

The member communications guidance is for use by trustees, managers and employers, and contains principles and guidelines on good practice in written communications to members. The key messages contained in the guidance include the following:

  • identify objectives and have a clear communication plan;
  • identify the best ways to communicate;
  • tailor communications to the audience;
  • remember the needs of all groups, not just active members;
  • be open and honest;
  • avoid jargon; and
  • try to get members to engage.

The investment guide can be issued by trustees and employers, if they choose, to help members understand defined contribution fund choices.

The member communications guidance can be viewed by clicking here and the investment guide can be viewed by clicking here.

Regulator publishes final approach to mortality assumptions

The Regulator has published its response to the recent consultation on good practice in selecting mortality assumptions for defined benefit pension schemes. As reported in our July 2008 UK Pensions Update, the Regulator announced earlier this summer that it was delaying the introduction of its new approach.

The full response that has now been published:

  • confirms that mortality assumptions will only be scrutinised where a scheme is flagged up by an existing trigger;
  • reiterates that the Regulator's approach will not be based on any one approach, with a range of different measures able to achieve equivalent outcomes;
  • highlights that recovery plans are governed by payments that are reasonably affordable;
  • releases guidance for trustees on the process for determining mortality assumptions; and
  • confirms that the changes will apply to valuations with effective dates from 22 September 2008 onwards.

The Regulator's press release can be viewed by clicking here.

Compulsory retirement age - the Heyday case

We mentioned in our Special Edition Update on age discrimination in November 2007 that an organisation called Heyday, a branch of Age Concern for England, is challenging the legality of the default contractual retirement age of 65 as set out in the age discrimination legislation. The High Court referred to the European Court of Justice ("ECJ") the question of whether the European Framework Directive extends to national rules permitting employers to dismiss employees aged 65 and over if the reason for dismissal is retirement.

Yesterday, the Advocate-General, agreed with Age Concern that UK rules on mandatory retirement are covered by the Framework Directive. However, he made it clear that a rule such as the default retirement age rule "can in principle be justified ... if that rule is objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market and it is not apparent that the means put in place to achieve that aim of public interest are inappropriate and unnecessary for the purpose".

The Advocate-General's opinion cites the Palacios case which suggests that Member States are left a relatively wide discretion in identifying the means to be used to achieve a legitimate aim relating to the social and employment policies pursued. The opinion also indicates that different treatment on the basis of age is "not by its nature a 'suspect ground', at least not so much as for example race or sex".

While the ECJ is not bound by the Advocate General's opinion, they are usually followed. Once the ECJ has delivered its ruling the case will be referred back to the UK courts. It will then be a question of whether the UK government can objectively justify the inclusion of the default retirement age in the age discrimination legislation.

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.