Hogan Lovells

Key Dates

Consultation paper and draft regulations issued on 21 December 2017.

Consultation response and final regulations issued on 26 February 2018.

The Contracting-out (Transfer and Transfer Payment) (Amendment) Regulations 2018/234 in force on 6 April 2018.


Summary

The DWP has issued a consultation response and final regulations, which will allow guaranteed minimum pensions (GMPs) and section 9(2B) rights (including rights to pensions in payment) to be transferred without consent to an occupational pension scheme that has never been contracted-out, under specified conditions.

The regulations have been issued in response to industry concern at the current restriction that GMPs and section 9(2B) rights can only be transferred without consent to a scheme which was previously contracted-out on a salary-related basis. Since the abolition of defined benefit (DB) contracting-out from 6 April 2016 it has not been possible to set up new contracted-out schemes, meaning that GMPs and section 9(2B) rights cannot be transferred without consent to any scheme established on or after 6 April 2016.

The proposed regulations introduce the concept of a "salary-related scheme", defined as a scheme which is not one which may only provide money purchase benefits and which does not fall within a prescribed class.

The regulations will allow transfers of GMPs and section 9(2B) rights (including rights to pensions in payment) without consent to a salary-related scheme which has never been contracted-out provided that the transfer is a connected employer transfer and various safeguards apply, including that:

Contracted-out rights transferred under the new provisions will continue to be treated as GMPs or section 9(2B) rights under the receiving scheme (and on further onward transfers). Following consultation, the regulations were amended to permit a scheme which has never been contracted-out and which receives a transfer of GMPs to convert the GMPs into scheme benefits in accordance with sections24A-H Pension Schemes Act 1993.



Date Accessed: 28/05/2022