In our March e-bulletin, we reported on the Government’s proposals to abolish contracting-out on a defined contribution basis from 6 April 2012. Four sets of regulations have now been made and two sets of draft regulations laid before Parliament. Principally, these regulations:
- Place an obligation on schemes currently contracted on a DC basis to notify affected members that the scheme has ceased to be contracted-out and explain the effect of that change on members’ entitlement to state additional pension, within 1 month and 4 months of the abolition date respectively. The exception to this is if schemes have already provided this information in the 12 months before the abolition date.
- Bring into force section 106 of the Pensions Act 2008. Section 106 removes from the abolition date the special requirements that currently apply to protected rights (for instance the requirement that protected rights be used to provide a pension for a spouse or civil partner).
Perhaps one outstanding issue relates to schemes which have protected rights provisions “entrenched” in their scheme rules. Such schemes may have to continue to maintain restrictions in relation to protected rights, notwithstanding that protected rights are to be abolished from April 2012. We understand that the DWP is considering whether there is a case for a statutory override to help schemes amend such provisions.