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What's New in GPT

Welcome to the latest updated version of The Guide for Pension Trustees – March 2018

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.

Old ideas/New ideas

The pensions environment rarely stays still, with politicians regularly feeling the need to make further changes. The demise of Carillion, following on from other corporate failures in 2017, has reignited the debate about the level of protection currently afforded to members’ accrued defined benefit (DB) pensions. The Work and Pensions Select Committee is continuing to investigate what it regards as abuses of the current system. The government appears to be looking at two main possible options to protect benefits and reduce the levies payable to the Pension Protection Fund.

The first is whether pension benefits rank sufficiently highly in the priorities of creditors on the insolvency of a company. Currently, unless specifically secured (e.g. against an asset owned by the company) they generally rank amongst general creditors, at the bottom of the pile. This means that in a seriously insolvent company wind-up, they will probably receive little or no share of corporate assets.

This issue has been raised on previous occasions following large insolvencies, but change has always been rejected, mainly because it would impact on companies’ ability to borrow in the normal course of business. Lenders would receive less protection themselves and would seek to cover this by such means as reducing loans, increasing interest rates or seeking security – or all three.

The second option apparently being considered is to penalise directors who deliberately or negligently underfund the pension scheme while paying themselves at a level deemed to be excessive.

In addition, debate continues around whether The Pensions Regulator should be given more power to intervene in respect of the payment by companies of dividends to shareholders where it is considered that such payments are at the expense of an unfairly low contribution rate to the pension scheme.

The raising once again of all these issues may indicate that we are on the verge of some major rebalancing of the interests of directors, shareholders and members. Trustees will be at the centre of any new requirements. It has also been announced that publication of the promised White Paper on DB schemes has been pushed back to the spring of 2018. Whether this is now going to reflect further rules to accommodate these new proposals remains to be seen.

DC scheme chairs targeted

Trustees of defined contribution (DC) schemes have also been in sharp focus recently, with The Pensions Regulator fining a number for failures in connection with the report that has to be produced by the chair of trustees. Fines have been levied both for failure to produce a report and for deficiencies in some of those produced. The Regulator has published a useful guide to the requirements, which trustees should follow. [See 12.3.13 (Note)]

New items covered in The Guide

Apart from continuing general updating and tidying, there have been a few specific updates made to The Guide since the last update, reflecting changes that have occurred over the period.

Scottish income tax

Following the announcement in the Scottish Parliament of an intention to invoke the power to adopt different income tax provision for Scottish citizens from April 2018, HMRC has been explaining how schemes should deal with these new provisions. This will involve identifying which members are Scottish citizens for this purpose, and how the relief at source system is to be applied. [See 10.1.1(a) (Note)]

Finance (No 2) Act 2017

This Act has placed onto the statute book two previously announced provisions – income tax relief on the cost of advice provided by employers for members, and the reduction in the money purchase annual allowance where a member has accessed part or all of their pension funds. [See 2.22.5–7]

Calculation of safeguarded-flexible benefits

DWP has issued updated guidance concerning the requirements for calculating protected funds that are not necessarily DB benefits, such as a DC benefit with a guaranteed annuity rate attached. These new requirements apply from April 2018 and will involve the need for trustees to undertake two separate calculations where the new rules apply. [See 17.4.1 (Note)]

PASA checklist for GMP reconciliation process

The Pensions Administration Standards Association (PASA) has produced a checklist for trustees to help them address the process of reconciling GMPs. [See 1.6.3 (Note)]

I hope you find the updates useful.

Kevin LeGrand

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

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