Franking meaning

The concept Historically, under contracted-out salary-related (COSR) schemes, a deferred member’s guaranteed minimum pension (GMP) could be uprated with no rise in the overall deferred pension. This was achieved by cutting the element above the GMP so that the total stayed unchanged, in effect using the excess to fund the GMP revaluation. That practice is termed ‘franking’; ‘anti-franking’ describes the statutory bar on it, which requires a floor of benefit—the ‘relevant aggregate’—for members, and for their spouses and civil partners, at GMP age. Consequently, schemes must preserve the pension above GMP and raise the member’s total pension, rather than trimming the excess. At GMP age, schemes must meet the relevant aggregate for members, spouses and civil partners by safeguarding the excess and increasing totals...

This practice note concerns schemes that were contracted-out salary-related (COSR) schemes before 6 April 2016 From 6 April 2016, salary-related contracting-out (often referred to as DB contracting-out) came to an end. Any schemes that had COSR status immediately beforehand automatically stopped being contracted-out with effect from that date. This practice note outlines the statutory requirements applying on and after 6 April 2016 to schemes that were COSR schemes before then. For background on the ending of DB contracting-out, see Practice Note: Abolition of DB contracting-out—an introduction [Archived]. For a general explanation of contracting-out, see Practice Note: What does ‘contracting-out’ mean for pension lawyers? They therefore no longer hold contracted-out status. Legal framework for former COSR schemes The principal contracting-out requirements for former COSR schemes are chiefly contained in the following legislation: Part III of the Pension Schemes Act 1993 (PSA 1993) the Occupational Pension Schemes (Schemes that were Contracted-out) (No 2) Regulations 2015, SI 2015/1677 (the New Contracting-out Regs)...

ARCHIVED: This archived Practice Note sets out the matters that the government and HMRC—and, in turn, employers and trustees—needed to address to deliver the abolition of DB contracting-out on 6 April 2016. It is not being updated and is provided purely for background. For more on DB contracting-out after abolition, see Practice Note: Legal regime applicable to Section 9(2B) rights and GMPs from 6 April 2016. From 6 April 2016, contracting-out on a salary-related basis (that is, DB contracting-out) ended. Schemes that were contracted-out salary-related (COSR) immediately before that date ceased to be contracted-out automatically with effect from then. For additional detail, see Practice Note: Abolition of DB contracting-out—an introduction [Archived]. To aid a smooth transition, the government and HMRC had to resolve a number of uncertainties and confront several challenges. Some points have not been conclusively settled. Note that benefits earned by members during COSR employment before 6 April 2016—Guaranteed Minimum Pensions (GMPs) and Section 9(2B) rights (also referred to as post-1997 COSR rights or reference...