Contracting out (Pensions) meaning

Statutory requirement By law, occupational pension schemes must offer short service benefits to eligible members whose pensionable service ceases before normal pension age. These preservation requirements are not automatically overriding; instead, schemes must include rule provisions that meet the preservation standards. The requirements do not extend to unfunded private sector schemes. Scheme rules must not contain any term that results, or could result, in a member being treated less favourably for short service benefits than for long service benefits. Qualification Members must have at least two years’ qualifying service or have transferred in benefits...

Practical points when applying revaluation Employers and trustees should ensure all member communications on benefit revaluation align with the position set out in the scheme rules. Member communications on revaluation should make clear they are subject to the scheme rules and that, if there is any inconsistency, the rules will take precedence. Practitioners should take care not to confuse increases applied to deferred benefits (revaluation) with rises applied to pensions in payment (indexation) under the scheme rules. Statutory requirement to revalue benefits Legislation requires pension schemes to revalue the deferred benefits of early leavers over the deferment period to at least a minimum level when those benefits are drawn. Occupational pension schemes must revalue a member’s benefits (excluding Guaranteed Minimum Pensions (GMPs)), where: the member’s pensionable service ends on or after ...

Statutory right to cash equivalent Individuals in defined benefit workplace pension schemes have a legal entitlement to transfer the cash equivalent of their scheme benefits to certain other pension arrangements. From 30 November 2021, using this right requires meeting one of two conditions set out in the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, SI 2021/1237, designed to protect members from fraudulent schemes. The stated cash equivalent is guaranteed for a three‑month period. This statutory entitlement takes precedence over any conflicting terms in the scheme’s trust deed and rules. The right applies where a member’s pensionable service has ended at least one year before normal pension age and the member has accrued rights under the scheme. Members who continue in service after pensionable service ends only acquire a...

Financial services adviser Broadstone reported its review of the Financial Conduct Authority (FCA)’s most recent Financial Lives Survey, released on 16 May 2025, indicated that one in three savers who moved were dissatisfied with the result. Around 12% of members with a DB pension are thinking of moving to a DC arrangement, Broadstone added, citing the FCA figures, which drew on responses from 17,950 people questioned between February and June 2024...

Original news: Mr S (CAS-52887–B6H4) – 8 July 2024 Summary The PO has partly upheld a complaint concerning a scheme’s pension transfer due diligence. The complainant first applied to transfer before the Pensions Regulator (TPR) released its Scorpion guidance, then revived his request once that guidance was in force. The scheme ought to have identified several red flags, and its failure amounted to maladministration. Nonetheless, the scheme had sufficiently cautioned about the risks of pension scams, and the complainant would, in any case, have proceeded with the transfer. The PO’s decision underscores the importance of warning members about pension scam risks. What were the facts? Mr S was a member of the City and County of Swansea Pension Fund (the Scheme)...

Original news Ms N (CAS-124815-S6D7)—26 May 2025 Summary The Pensions Ombudsman upheld a complaint concerning a delayed pension transfer. The complainant was awarded compensation for significant distress and inconvenience. However, she was not awarded compensation for financial loss because the Pensions Ombudsman was not persuaded about how she would have invested the transfer, and adding statutory interest to the transfer yielded a sum lower than the actual transfer value. This decision serves as a reminder that, in a pension transfer delay case, a member must evidence financial loss. What were the facts? Ms N was a member of the Scottish Widows Executive Pension Plan (the Scheme). Ms N’s ex‑husband (Mr N) was the trustee director of the Scheme in this specific case...

Contracting-out on a salary-related basis (also known as defined benefit (DB) contracting-out) was abolished on 6 April 2016. Before abolition, members of contracted-out salary-related (COSR) schemes could have built up one of two forms of contracted-out entitlement. In this Practice Note, these are collectively described as ‘contracted-out salary-related rights’ or, in short, ‘COSR rights’. Guaranteed minimum pensions (GMPs), being contracted-out rights built up before 6 April 1997 Section 9(2B) rights (also called post-1997 contracted-out salary-related rights or post-1997 COSR rights), being contracted-out rights built up between 6 April 1997 and 5 April 2016 The framework for transferring COSR rights is prescribed by the Contracting-out (Transfer and Transfer Payment) Regulations 1996, SI 1996/1462 (the Contracting-out Transfer Regulations). HMRC has issued guidance on transferring COSR rights. This Practice Note addresses transfers carried out after the end of DB contracting-out, namely on and from 6 April 2016. For material on transfers of COSR rights made prior to the abolition of DB contracting-out, see Practice...

This page gathers pensions resources that cover key topics concerning EU law matters specifically. For general EU law information, consult EU structure, EU legislative process, EU judicial system, and EU rights and policies; these are found in the EU Law topic within the Public Law practice area for reference as well. Brexit Brexit and IP completion day—the implications for pensions [Archived] Business sales / TUPE transfers TUPE—an overview for pensions lawyers TUPE and Beckmann—the pensions exception How to deal with Beckmann liabilities on a...

This Practice Note concentrates on the matters that applied prior to 6 April 2016—the date on which salary-related contracting-out (often called DB contracting-out) was brought to an end—when buying out these contracted-out salary-related (COSR) entitlements: guaranteed minimum pensions (GMPs)—the benefits built up by COSR scheme members as a result of contracting out between 6 April 1978 and 5 April 1997 Section 9(2B) rights (also referred to as post-1997 COSR rights)—the benefits accrued by COSR scheme members as a result of contracting out between 6 April 1997 and 5 April 2016 The legislative requirements that applied differed according to whether the relevant contracted-out rights were GMPs or Section 9(2B) rights. For guidance on the buy-out considerations from 6 April 2016 for Section 9(2B) rights and GMPs, see Practice Note: Buying out Section 9(2B) rights and GMPs from 6 April 2016. For general issues relating to buy-outs, see Practice Note: De-risking—pension buy-outs and buy-ins. For information on the ending of DB contracting-out on 6 April...

This Deed of Merger is entered into on the [ insert day ] day of [ insert date ]. Parties [ TRUSTEE OF TRANSFERRING SCHEME ] (Company No. [ ]), with its registered office at [ address ] (the 'Transferring Trustee'); [ PRINCIPAL EMPLOYER OF TRANSFERRING SCHEME ] (Company No. [ ]), whose registered office is at [ address ] ('Transferring Scheme Employer'); [ TRUSTEE OF RECEIVING SCHEME ] (Company No. [ ]), whose registered office is at [ address ] (the 'Receiving Trustee'); [ PRINCIPAL EMPLOYER OF RECEIVING SCHEME ] (Company No. [ ]), whose registered office is at [ address ] ('Receiving Scheme Employer'). BACKGROUND The Transferring Trustee acts as trustee of the [ Name of Transferring Scheme ] (the 'Transferring Scheme'). The Receiving Trustee serves as trustee of the [ Name of Receiving Scheme ] (the 'Receiving Scheme'). The Receiving Scheme Employer is the Principal Employer of the Receiving Scheme, and the...

Name: ________________________________ Date of Birth: ________________________________ Membership Number: __________________ National Insurance Number: ____________________ Company Name: ________________________ Address: ____________________________________ Date Joined Scheme: ___________________ Date of Leaving: ____________________________ To the Trustees of the [ insert name of scheme ] Pension Scheme (the ‘Scheme’). I have benefits within the Scheme and apply to move the value of those benefits from the Scheme as outlined below. This also covers any amounts that would be paid from the Scheme to my dependants or beneficiaries if I were to die. I confirm I have received a statement of entitlement for my Scheme benefits showing the cash equivalent transfer value (CETV) as at my guarantee date. I wish to transfer my benefits to the Receiving Arrangement(s) listed here: Name of Receiving Arrangement: ________________________________ Address of Receiving Arrangement: ________________________________ HMRC Registration Number: ________________________________ DECLARATIONS Decision to transfer out • The choice to transfer my benefits to the Receiving Arrangement is mine alone,...