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Pensions Bulletin 2016/12

Pensions & benefits

Suddenly, a new Secretary of State for Work and Pensions

With the shock resignation of Iain Duncan Smith last week, Stephen Crabb has become the new Secretary of State for Work and Pensions. Mr Crabb was previously the Secretary of State for Wales.


An impressive appointment for Mr Crabb, but more remarkable are the scenes surrounding Iain Duncan Smith’s departure. It is hoped the uncertainty caused by this resignation will not translate into further uncertainty in Government pensions policy.

Make sure your members don’t lose Fixed Protection 2016 before it starts – 6 April is a key deadline

In less than two weeks’ time, on 6 April 2016, the lifetime allowance will reduce from £1.25m to £1m. We have over the past weeks published the emerging information from HMRC about the reduction and the protections that are available to members.

This is just a reminder that - although the timescales for applying for the protections may be quite open - 5 April 2016 is a hard deadline for one particular aspect. Individuals can keep the higher lifetime allowance of £1.25m by applying for Fixed Protection 2016 (see Pensions Bulletin 2015/54) only if they meet (and continue to meet) certain conditions, with a key one being that the individual has stopped “benefit accrual” in all pension schemes by 5 April 2016.

This means there can be no contributions “made” into a defined contribution scheme after 5 April 2016 and the individual will probably need to fully opt out of defined benefit and cash balance schemes before then (but this can be a more complex issue in some cases).


So this is just a final reminder that 5 April 2016 is a hard deadline with no flexibility or chance for correction. If accrual happens after that date then the individual will be disqualified from applying for Fixed Protection 2016 forever.

We hope that HR/pension managers and payroll departments already know about these issues and have them under control. For DC, the definition of “made” means any remaining contributions that are deducted from pay using net pay must have been deducted before 5 April 2016; all other DC contributions must have been received by the scheme before 5 April 2016.

“Full” registration for Fixed Protection 2016 will not be possible until after the 2016 Finance Bill has received Royal Assent sometime this summer, and HMRC still has not finalised all aspects of the “interim” registration process (see Pensions Bulletin 2016/07). This has not helped the situation because people may find themselves disqualified before they even start thinking about completing the application form.

Pensions Regulator updates its compliance and enforcement policy for schemes providing DC benefits

The Pensions Regulator is consulting on what appears to be a complete recasting of its compliance and enforcement policy for occupational pension schemes offering DC benefits.

The policy, which has been in existence since November 2013 (see Pensions Bulletin 2013/49), needs to be adjusted to, amongst other things, cover the mandatory penalty for a breach of the requirement to produce an annual governance statement. On this, the Regulator proposes a penalty of between £500 and £2,000, with the upper limit likely to apply where the scheme has a professional trustee in place. The amount payable within this range will also depend on the number of members with DC benefits and whether there has been the same breach within the last three years.

Separately, the Regulator also sets out:

  • Principles that will guide it in determining the amount of penalty that would be appropriate where it is the decision-maker, or where it is making a recommendation to the Determinations Panel where the Panel is the decision-maker; and

  • Its proposed procedure for making decisions about the exercise of its functions under the Occupational Pension Schemes (Charges and Governance) Regulations 2015

The consultation closes on 3 May 2016.

DWP revises its COPE factsheet

At the end of 2015, the DWP added a factsheet to its suite of booklets and guides on the new State Pension which described the Contracted-out Pension Equivalent (COPE) amount. The COPE is a term coined by the DWP in 2015 to refer to the deduction that is made from an individual’s old additional State Pension to reflect any period from 1978 in which they were contracted-out. This deduction is reflected in state pension statements and has been the cause of much confusion by recipients of such statements.

Following concerns that some of the content of the factsheet was potentially misleading (see Pensions Bulletin 2015/52), the DWP withdrew it. It has now been re-issued and is much more detailed than before.


Unfortunately version 2 is not much better. It continues with the premise that the contracted-out scheme will contain an amount that is equivalent to the COPE, rather than making explicit that it is no more than a deduction that the State makes quite independently of what the contracted-out scheme may provide.

DWP publishes last-minute resource pack of State Pension information

A starter email, poster and bullet points are amongst the materials released by the DWP on 16 March in its new State Pension resource pack.

The intention is for stakeholders, presumably including trustees, and employers to send out the most appropriate information to their members/employees to inform them about the upcoming State Pension changes.


The idea is that the materials can be sent to members/employees with minimal adjustment – probably a good thing given the State Pension changes are only two weeks away!

Early State Pensions for women – evidence required

The Commons’ Work and Pensions Committee has wasted no time launching an inquiry into the possible effects of allowing certain women born in the 1950s to take their State Pensions early, before State Pension Age (SPA), with an actuarial reduction for early payment.

The inquiry is a result of the recommendations of the Committee’s report into the communication of SPA changes published last week (see Pensions Bulletin 2016/10). It seeks to alleviate some of the hardship caused by the sharp rise in many women’s SPA.

The Committee is asking for evidence on topics such as “who should be eligible and why”, “how popular would the scheme be amongst the people eligible” and “what impact would it have on the lives of the people eligible”.

The deadline for written submissions is 10 April 2016.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.