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What's New in GPT

Welcome to the latest updated version of The Guide for Pension Trustees – July 2017

The Guide for Pension Trustees aims to keep its readers up to date with changes in legislation and regulation, and with developments in practice, that affect pension trustees and others concerned in the management of pensions.

Introduction – uncertainty and surprises abound!

Since our last update the world in general has continued to live with uncertainty, which is not an ideal state of affairs for workplace pensions, nor for the businesses that support them. Although most of us have grown to accept the unexpected decision of Brexit, what exactly that will mean is still a long way from being resolved. Meanwhile trustees will have to continue running their schemes for their members while coping with volatility in terms of both financial and policy issues, while accepting that there will be little parliamentary time available for necessary changes to the law that are not directly Brexit-related.

On the ‘uncertain and surprising’ list was the snap General Election on 8 June, and its outcome of a hung parliament. The implications of a parliament where no single party has an overall majority could be far-reaching, both in terms of the likely watering-down of new legislation (only relatively innocuous Bills that do not greatly offend any party are likely to be passed) and the increased likelihood of a repeat General Election sooner rather than later. This of course would confound the intention behind the fixed-term parliament legislation designed to encourage more certainty.

The General Election forced the shelving (temporary or permanent?) of several proposed pensions items in the rush to get vital legislation onto the statute book before the end of the last parliament, when they would otherwise have been lost. Falling into this category were the proposed reduction in the Money Purchase Annual Allowance from £10,000 to £4,000 [see 1.23.1] and the Pension Advice Allowance [see 11.4.10].

Also missing from the expected developments was the review of the State pension age, which is required once in every parliament. The latest review was undertaken by John Cridland, but his report was shelved in the pre-election rush. Nevertheless we should expect some developments on this front – whether based on this report, or involving a new one.

New items covered in The Guide

Apart from housekeeping and general updating the following key issues have been specifically added to The Guide.

Developments in GMP equalisation

The pensions industry, working with the DWP, produced some suggested approaches for tackling this long-standing and challenging problem. This seemed to offer a credible way forward for schemes and their sponsors. However, a case is now being assembled in respect of Lloyds Bank to go to the High Court for a definitive judgment. A judgment is not expected before 2018, and given the importance of the issue, the likelihood of appeals is high. [See 1.7.10]

Regulator guidance on investment

The Pensions Regulator has produced some helpful new guidance for trustees when investing DB scheme assets. [See 5.3.9]

Cyber security

This subject is getting a lot of attention at the moment, but many pension schemes are well behind the curve, leaving their members at risk. [See 10.5.13]

New master trust regulatory regime

Growing concern over the security of members’ DC benefits under master trusts has led to the introduction of new, stronger regulation by the Pensions Regulator, both on schemes themselves and on their trustees, including a new ‘fit for purpose’ test. The enabling legislation was rushed through in the Pension Schemes Act 2017 and will be introduced over time, with the new regime expected to apply fully in October 2018. [See 1.18.5 and 2.21]

Regulated Apportionment Arrangements

A recent spate of high-profile employer insolvencies has brought the issue of underfunded Defined Benefit pension schemes back to public attention. Although the Pension Protection Fund (PPF) exists to provide compensation to scheme members whose pension entitlements cannot be met fully from their underfunded scheme, a little-used (and therefore relatively unknown) alternative option may in some cases give members the opportunity to gain better benefits than those from the PPF. In view of its growing importance the Regulated Apportionment Arrangement is now covered in The Guide. [See 16.12]

Transfer of Defined Benefit contracted-out benefits

A further issue connected with addressing an underfunded scheme of an insolvent employer seeking to transfer its benefits into a brand new scheme, to give an alternative option to PPF membership, was the requirement that contracted-out benefits could only be transferred into a contracted-out (or formerly contracted-out) scheme. Since no new contracted-out schemes can be established, this closed the RAA option to members of DB contracted-out schemes. This has now been addressed. [See 16.12.3]

I hope that you find the latest iteration of The Guide for Pension Trustees helpful.

Kevin LeGrand

If you have any questions about this Update, please contact the Helpdesk on 0800 980 1332, or email

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