Developments in Employee Benefits law and practice

30 November 2015

Week ending 29 Nov: Autumn Statement: Pensions|Regulator publishes new draft DC code for consultation|Updated State Pension Guidance|etc...

Autumn Statement - Pensions

George Osborne, the Chancellor of the Exchequer, delivered his Spending Review and Autumn Statement to Parliament on 25 November 2015. The following pensions-related announcements were made - He confirmed that the basic State Pension will be increased to £119.30 a week from April 2016, while the starting rate for a full new ‘single tier’ State Pension will be £155.65. He also announced that the government will delay the next two scheduled increases in automatic enrolment minimum contribution rates by six months each, to align these changes with the start of the tax year.

State Pensions

The basic State Pension will be increased to £119.30 a week from April 2016, an increase of £3.35.

From April 2016, those reaching state pensionable age will receive a new ‘single-tier’ State Pension, and the starting rate for a full new State Pension will be £155.65 a week. Those reaching pensionable age before the reforms are introduced will receive their State Pension in line with the current rules.

Click here for full pension and benefit rates for next year.

Pension Credit

The single rate of the Standard Minimum Guarantee will rise in line with earnings by £4.40 to £155.60 per week, and the couple rate will rise by £6.70 to £237.55 per week. The Savings Credit threshold will rise to £133.82 for a single pensioner and to £212.97 for a couple, which will reduce the single rate of the Savings Credit maximum by £1.75 to £13.07 and the couple rate by £2.68 to £14.75.

The government will end the payment of Pension Credit to claimants to who travel outside of Great Britain for longer than four weeks consecutively, from April 2016.

Automatic enrolment minimum contribution rates

To simplify the administration of automatic enrolment for the smallest employers in particular, the government will delay the next two scheduled increases in automatic enrolment minimum contribution rates by six months each, to align these changes with the start of the tax year. Instead of increases taking place in October 2017 and October 2018, they will now occur in April of the following year.

Secondary market for annuities

The government intends to remove the barriers to creating a secondary market for annuities, allowing individuals to sell their annuity income stream. It will set out further details on this measure, including the framework for the consumer protection package, in its consultation response in December 2015.

Taxation on pensions

  • At Summer Budget 2015, the government launched a consultation on the system of pensions tax relief. The government is considering the responses received and will publish its response at Budget 2016.
  • Legislation will be introduced in the Finance Bill 2016 to simplify the test that takes place when a Dependant’s Scheme Pension is payable.
  • Following the introduction of a single tier pension from 6 April 2016, legislation will be introduced in the Finance Bill 2016 to enable the pension tax rules on bridging pensions to be aligned with Department for Work and Pensions legislation.
  • The government will legislate in the Finance Bill 2016 to ensure a charge to inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death. This will be backdated to apply to deaths on or after 6 April 2011.

Local Government Pension Scheme

The government has published guidance for pooling Local Government Pension Scheme Fund assets into up to six British Wealth Funds, containing at least £25bn of Scheme assets each. The government is now inviting administering authorities to come forward with their proposals for new pooled structures in line with the guidance to significantly reduce costs while maintaining overall investment performance, with the wider ambition of matching the infrastructure investment levels of the top global pension funds.

Regulator publishes new draft DC code for consultation

The Pensions Regulator has published a draft of a revised defined contribution (DC) code of practice for consultation. Responses should be submitted by 29 January 2016, and the new DC code will come into force in July 2016.

The new draft DC code is shorter and simpler, and sets out the standards of conduct and practice the regulator expects trustee boards to meet in complying with their legal duties, and to deliver better long term outcomes for retirement savers.

The new code will overhaul the existing DC code first published in 2013 to better support trustee boards and managers of schemes offering money purchase benefits as they adapt to major reforms introduced earlier this year.

The regulator intends to consult separately on a series of ‘how to’ guides to support the new DC code in the Spring.

DWP consultation on changes to pensions legislation, including ‘GARs’

The DWP has issued a consultation seeking views on proposed changes to pensions legislation, to ensure that the new pension flexibilities operate as intended.

Changes introduced by the Taxation of Pensions Act 2014 and the Pension Schemes Act 2015 introduced the concept of flexible benefits and give pension scheme members with these benefits greater flexibility about how and when they access their pension savings.

A number of changes to pensions secondary legislation were also required, most of which have already been made in time for the April 2015 commencement. However, given the scale of the changes, further changes in other areas are also required.

The consultation seeks views on proposed minor and technical regulatory changes to 4 areas of pensions legislation, to ensure that the new pension flexibilities operate as intended:

  • pension sharing on divorce, including a requirement that, where an attachment order exists, schemes will have to write out to the former spouse at the point the member applies to take their flexible benefits;
  • the final technical changes needed to reflect the pension flexibilities to operate in specific situations (for example, where a scheme is winding up);
  • the Pension Protection Fund, including amendments to the Pension Protection Fund (Entry Rules) Regulations around schemes whose sponsoring employer cannot have an insolvency event;
  • disclosure of information, to place an obligation on trustees of occupational pension schemes to give generic risk warnings to scheme members who wish to take their benefits flexibly.

The consultation also seeks views on how the government should simplify the valuation process for the purposes of the new advice requirement for pensions which contain a guaranteed annuity rate (GAR).

OPS Revaluation Order issued

Under this Order (SI 2015/1916), the percentages by which preserved pensions in final salary occupational pension schemes are to be revalued are set out.

The following revaluation percentages are listed as examples, with the timescales reflecting the revaluation period:

  • 1 January 1986—31 December 2015: 160%
  • 1 January 1997—31 December 2015: 61.2%
  • 1 January 2008—31 December 2015: 19.2%

FCA updated on pensions and retirement income

The Financial Conduct Authority (FCA) has published a press release which notes that it is undertaking work designed to identify emerging trends and to set out expectations on the issues in this market. The link below sets out more on ongoing work, an update on the timing of the Retirement Outcomes review, and includes FCA’s request for information to firms relating to charges for decumulation pension products.

Updated State Pension Guidance

Following the Autumn Statement, the DWP has updated its guidance and fact sheets on the new State Pension. It has also added a new fact sheet, How to increase your new State Pension.


John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email:

Julian Rowe, Head of Technical | Email: