Defined contribution meaning

THIS CHECKLIST APPLIES TO OCCUPATIONAL PENSION SCHEMES This checklist highlights the key actions involved in bringing an occupational pension scheme to a close—whether a defined benefit (DB) or defined contribution (DC) arrangement—and aligns with winding-up guidance from the Pensions Regulator (TPR). For fuller detail on these steps, see Practice Notes: Winding up a defined benefit (DB) occupational pension scheme; Winding up a defined contribution (DC) occupational pension scheme; and Winding-up an occupational pension scheme—statutory disclosure from 6 April 2014, reporting and record-keeping requirements. Data cleansing and reconciling records Once trustees decide to wind up the scheme, they should carry out a thorough data cleansing exercise. As this can be lengthy, it should, where practicable, be completed before formal winding-up starts. Where trustees cannot control the timing of the wind-up, cleansing and planning should begin as early as possible within the winding-up process. As part of the data cleansing exercise, trustees should: Check and reconcile member records. Where the scheme is a former contracted-out...

THIS CHECKLIST APPLIES TO TRUSTEES OF PRIVATE SECTOR DEFINED BENEFIT OCCUPATIONAL PENSION SCHEMES This Checklist has been archived. It summarises the actions DB trustees needed to take in the run-up to 6 April 2015, and afterwards, to accommodate the pension flexibilities (also called pension freedoms) introduced on 6 April 2015. For more about the nature of those reforms, see Practice Note: Pension freedoms—an introduction [Archived]. In this Checklist, ‘DB trustees’ denotes the trustees (or managers) of arrangements other than those providing flexible benefits, i.e. excluding: money purchase arrangements cash balance arrangements other arrangements that typically require an individual to buy an annuity Note that the additional voluntary contribution (AVC) facilities of defined benefit schemes do, in effect, amount to arrangements offering flexibilities. The issues set out in Pension flexibilities: steps for DC trustees to take—checklist [Archived] are therefore relevant to trustees of such schemes, but only to the extent that the AVC facilities are concerned. Preliminary steps ...

THIS CHECKLIST APPLIES TO TRUSTEES OF DEFINED CONTRIBUTION (DC) OCCUPATIONAL PENSION SCHEMES This Checklist has now been archived. It sets out the actions DC trustees were required to undertake both before and after 6 April 2015, concerning the pension flexibilities/pension freedoms that came into effect on 6 April 2015. For further detail on the scope and nature of those reforms, refer to Practice Note: Pension freedoms—an introduction [Archived]. Within this Checklist, 'DC trustees' refers to trustees (or managers) of pension arrangements providing flexible benefits, ie: money purchase arrangements cash balance arrangements other arrangements which typically require an individual to purchase an annuity Step 1—preliminary steps familiarise yourself with the pension flexibilities in detail...

According to the FCA's figures, 41,500 individuals accessed their pensions for lump-sum withdrawals in the last financial year, up 14.6% from 36,200 a year earlier, the watchdog said. At the same time, the FCA noted a 13.6% slide in annuity sales, falling to 59,100 over the last financial year from 68,500 the year before, according to the regulator. The regulator also reported that transfers from defined benefit to defined contribution schemes decreased, dropping to 18,073 in the financial year ending March 2023 from 26,619 in the preceding year...

TPR stated that its refreshed corporate plan for 2024 to 2027 will press ahead with policy measures aimed at safeguarding consumers’ funds and interests as the industry evolves. This involves bringing in new rules on pension scheme funding, trailed by the government in January 2023, intended to permit greater flexibility for investing in higher‑risk assets to help stimulate UK economic growth. The regulator added it will keep building the value‑for‑money framework, while making sure that new defined benefit (DB) consolidators, which combine smaller schemes, act to protect savers. The framework aims to move attention away from price and towards long‑term value for defined contribution (DC) pension savings. The government also intends to reshape the Pension Protection Fund as a public sector consolidator as the sector undergoes changes in the UK over 2024 to 2027 as well...

Public disclosures to compare pension schemes The government said that opening up disclosures will enable employers and workers to compare pension schemes more easily. But the Society of Pension Professionals warned the policy could also weaken pension funds’ decision-making authority. Chancellor of the Exchequer Jeremy Hunt outlined the disclosure programme in March 2024, alongside a push for UK pension funds to invest at least 5% of assets in unlisted British companies. In a paper dated 1 May 2024, the SPP noted that the main pension providers—covering more than 15 million UK pension savers—already publish their UK investments via Corporate Adviser magazine’s annual Master Trust & GPP report. The SPP pointed out that such disclosures are already available through that report. According to the paper, the results indicate that funds with higher UK equity weightings have typically underperformed those with minimal or no exposure to the UK market...

The Pensions Regulator (the Regulator) The Regulator is an arm’s-length public body set up under the Pensions Act 2004 (PeA 2004). Its authority to impose contribution notices and financial support directions appears in PeA 2004, ss 38–50. Although the Act does not use the label, these provisions are widely known as the Regulator’s ‘moral hazard’ powers. Their purpose is to counter the ‘moral hazard’ arising from the Pension Protection Fund (PPF): the possibility that corporate groups might organise their structures so as to heighten exposure within their pension schemes, comfortable that the PPF would intervene if the employer entered insolvency. The principal moral hazard tools—and the only ones exercised so far—are the power to issue a contribution notice (CN) and the power to issue a financial support direction (FSD). A CN compels the recipient to pay a specified amount into a defined benefit occupational pension scheme. A CN can be issued where the criteria in PeA 2004, s 38 are satisfied. These mechanisms exist to deter behaviour that would...

This Practice Note sets out the principal steps for properly bringing to an end a defined contribution (DC) occupational pension scheme—also described as a money purchase occupational pension arrangement or a trust-based defined contribution plan. Throughout this Practice Note, this type of arrangement is termed a ‘DC scheme’. The guidance applies across a range of DC schemes, including trusts that sit outside the authorised master trust framework and small self-administered pension schemes (SSASs), although the latter may, in certain cases, be excluded from particular statutory obligations or requirements. This Practice Note does not cover the winding-up of any: an ‘authorised master trust’ under the Pension Schemes Act 2017 (PSA 2017)—for further detailed information, please see Practice Note: The authorisation and supervisory regime for master trusts, contract-based DC arrangements (eg group personal pension arrangements)—for further details and guidance, see Practice Note: Winding up of personal pension schemes Statute makes distinct and specific provision for hybrid schemes (combining defined benefit (DB) and DC...

The Pensions Regulator’s scheme management enforcement strategy explains its approach to compliance and enforcement across defined benefits funding, defined contribution and public service pension schemes, while also describing the outcomes TPR may pursue and the means by which it could achieve them, all to strengthen safety and security for pension savers. Its prosecution policy and broader enforcement strategy set out the principal aims of its enforcement activity and give insight into the framework TPR applies when deciding which cases to take forward for enforcement action. Initial considerations in TPR investigations In its capacity as the UK regulator for work-based pension schemes, TPR has a suite of information-gathering powers to identify and track risks and to obtain evidence to support criminal prosecutions. These include: requiring reports of breaches of the law and notifiable events requiring reports prepared by skilled persons on specified issues compelling trustees and employers to provide documents and other information the power to inspect premises For more...

Effective from [ insert date ], this statement of investment principles applies. 1 Statement of investment principles 1.1 Purpose of statement This document outlines the principles that steer decisions on investing the assets of the [ insert name ] Pension Scheme (the Scheme). It is published by the Trustees of the [ insert name ] Pension Scheme (the Trustees) to meet the requirements of the Pensions Act 1995, s 35. 1.2 Review The statement will be assessed each year. The Trustees may conduct an ad hoc review at any time if they consider there has been a material change in investment policy, or any other circumstances affecting the Scheme. 1.3 Advice The Trustees have received and evaluated written advice on the contents of this statement in a letter from [ insert name of investment consultant or actuary ]. [ insert name ] have confirmed to the Trustees that, through their ability and practical experience in financial matters, and with appropriate knowledge...

This document offers general guidance on the probate process for non‑professional personal representatives and bereaved family members. Your probate practitioner can provide tailored advice specific to your circumstances. It is aimed at those administering estates without professional expertise and at families coping with a bereavement. It provides broad information, not case‑specific guidance. FORTHCOMING CHANGE relating to IHT on pension death benefits At the Autumn Budget 2024 on 30 October 2024, the government confirmed that, from 6 April 2027, unused pension pots and death benefits paid from a pension will be included in a person’s estate for IHT. The rule will cover both defined contribution and defined benefit arrangements, and apply to UK‑registered plans as well as qualifying non‑UK pension schemes. A technical consultation on how these reforms will operate runs from 30 October 2024 to 22 January 2025. For further details, see: Autumn Budget 2024—Private Client analysis — Inheritance tax. Coping with the death of someone close can bring significant emotional and practical hurdles. If you are...

Contribution agreement—private M&A—asset purchase This DEED is executed on [ insert day and month ] 20[ insert year ] Parties The persons whose names and addresses appear in the Schedule (together, the Sellers, and each a Seller). BACKGROUND The Sellers have entered into, or expect shortly to enter into, the Asset Purchase Agreement with the Buyer in relation to the disposal of the Business and the Assets (each as defined in the Asset Purchase Agreement). The Sellers have agreed to govern how Claims will be handled under the Asset Purchase Agreement and to apportion their respective liabilities arising from any Claim, in accordance with this Deed...

LPA’s obligations when imposing financial contributions Developers are frequently obliged to make monetary payments to the local planning authority (LPA) to fund defined projects, helping to offset the harmful effects of a scheme and thereby enable the grant of planning permission. This Q&A addresses circumstances where the section 106 agreement contains no specific express clawback mechanism. When a planning obligation (a section 106 obligation) is proposed to secure a financial contribution at the determination stage of a planning application, that contribution must satisfy the stringent legal tests in regulation 122 of the Community Infrastructure Levy Regulations 2010, SI 2010/948 (SI 2010/948, reg 122) (as amended). Only by meeting those tests can any such payment lawfully and ultimately underpin the grant of planning permission...