Hogan Lovells

Key Dates

Non-statutory guidance updated 6 February 2018.

Guidance originally issued by the DWP on 13 November 2017 and updated in February 2018.

The Pension Schemes Act 2015 (Transitional Provisions and Appropriate Independent Advice) (Amendment) Regulations 2017/717 in force on 6 April 2018.

The Pension Schemes Act 2105 (Transitional Provisions and Appropriate Independent Advice) (Amendment No 2) Regulations 2017/1272 in force on 6 April 2018.


The DWP has updated its non-statutory guidance (first issued in November 2017) to help explain the information requirements in relation to members with safeguarded-flexible benefits and to suggest best practice.

Pension credit rights and enhanced transfer values

The existing Appropriate Independent Advice Regulations will be amended to clarify that, when considering whether the £30,000 advice threshold is met, all a member's safeguarded benefits under the scheme must be considered, including any safeguarded benefits derived from pension credit rights. 

The regulations will also be amended to clarify that any enhancement under the transfer value regulations must be excluded when comparing the value of a member's safeguarded benefits with the £30,000 threshold.  Trustees who may currently calculate transfer values using an approach that is higher than best estimate are recommended to consult their scheme actuary.

"Safeguarded-flexible benefits"

The regulations introduce a new category of "safeguarded-flexible benefits", meaning benefits which are both safeguarded for the purpose of the independent advice requirement and are also flexible benefits.  The September 2017 consultation paper explained that a large proportion of safeguarded-flexible benefits, such as defined contribution (DC) pots with a GAR, exist within personal pensions and other contract-based arrangements. 

Application to occupational pension schemes

As a reminder, GARs under occupational schemes are almost always part of the terms and conditions of an insurance policy held by the trustees on behalf of the member.  Such benefits are classed as money purchase benefits and so are not subject to the advice requirement.  Only in cases where the GAR is included in the scheme rules does the advice requirement apply.

Money purchase benefits will not fall within the definition of the new "safeguarded-flexible benefits".  The changes to the valuation of benefits and the introduction of a requirement to send a risk warning (please see below) will not therefore apply in relation to GAR benefits under an occupational pension scheme, unless the GAR is set out in the scheme rules (which is rare).

Valuation of benefits with a guaranteed annuity rate (GAR)

Concerns have arisen that, where a member wants to transfer a DC pot with a GAR attached, providers are currently required to value the GAR using methodology applicable to final salary benefits for the purposes of determining whether the value of the benefits exceeds £30,000 and, therefore, whether the member has to take appropriate independent advice before making the transfer.

The final regulations will make clear that, for the purposes of the advice requirement threshold, the value of the member's benefits is equal to the transfer value which s/he could transfer to a new scheme.  In the case of GAR benefits, this will be the value of the member's DC pot.

Commencement and transitional arrangements in relation to advice requirement

The draft regulations were to have come into force on either 6 April or 1 October 2017.  The commencement date has been pushed back to 6 April 2018.  Transitional arrangements will apply to members who are told on or after 1 October 2017 that the advice requirement applies to them but who will fall outside the requirement when the new regulations are in force on 6 April 2018.

Risk warnings in relation to safeguarded-flexible benefits

Occupational and personal pension schemes will be required to send risk warnings to members (or survivors) with GARs in certain circumstances (but only where the GAR benefits are not "money purchase benefits" – please see the explanation above).  Points to note include the following.

Date Accessed: 28/05/2022