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Benefits based on the build-up of a ‘pot’ of money, accumulated through the investment of contributions paid into a pension scheme by, or on behalf of, the member.
Defined contribution arrangements (also known as money purchase arrangements) make no promises as to benefit levels.
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Commutation of small lump sums—checklist Trivial commutation lump sums The conditions for payment of a trivial commutation lump sum as an authorised member payment are as follows: • the payment must be made either from a defined benefit arrangement, a collective defined contribution arrangement, in respect of a money purchase pension already in payment, or a combination thereof • the member must have either reached normal minimum pension age or met the ill-health condition • the member must have some lump sum allowance available • the payment must extinguish the member's entitlement to benefits under the scheme • the value of the member's pension rights across all schemes must not exceed £30,000 on the valuation date (known as the nominated date) • the lump sum payment must be paid within a 12-month window (known as the commutation period), and • The payment is made either: ◦ at the time when no trivial commutation lump sum has previously been paid to the member, or ◦ before the end of...
Pension issues on a TUPE transfer—checklist In this Checklist, references to 'transferring employees' are to employees of an undertaking or service provider whose employment is intended to transfer under the operation of the Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246 (TUPE). When does TUPE apply? The Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246 (TUPE), which have been in force since 6 April 2006, apply where there is a 'relevant transfer'. This covers: • business transfers—a transfer of an undertaking, business or part of an undertaking or business, situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity • a service provision change—involving a change in the provider of a service, ie a client 'outsourcing' work to a contractor (first generation outsourcing), bringing that work back in-house ('insourcing') or re-assigning that work to another contractor (second generation outsourcing), where certain conditions are satisfied. The supply of goods for the client's...
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Before 2012, there was no general requirement for employers to either:•make contributions in respect of their employees, or•make retirement scheme provision for their employeesThe introduction of the auto-enrolment regime in 2012 altered this general picture, and employers subject to the auto-enrolment legislation are required to contribute to employees’ pension arrangements in accordance with the requirements of that legislation. For further information on the minimum employer contribution rates, see Practice Note: Auto-enrolment—what types of scheme may be used?In view of the nature of defined contribution (DC) pension schemes and particularly the fact that the retirement benefits ultimately provided by such schemes depend partly on the contributions paid to them, it is unsurprising that there has been a growing emphasis on the prompt and accurate payment of contributions to such schemes. For further information on DC schemes, see Types of pension arrangements for employees and Money purchase benefits—the statutory definition.Requirement for a payment schedule—DC occupational pension schemesTrustees of DC occupational pension schemes (or more specifically, schemes capable of being classified as 'money...
ARCHIVED: This archived Practice Note provides information on the legal framework which had previously been put in place for collective defined contribution (CDC) schemes under the Pension Schemes Act 2015. It is not maintained and is for background information only. For more information on the current legal framework for CDC schemes, see Practice Note: Collective defined contribution (CDC) schemes—an introduction and Collective defined contribution (CDC) schemes under the Pension Schemes Act 2021.What are collective defined contribution schemes?Collective defined contribution (CDC) schemes are a type of defined contribution scheme in which the assets are pooled on behalf of members without members having any interest in particular assets.They are being promoted by the government as part of its reforms to reshape workplace pensions.This Practice Note explains a little of how they work, comments on the advantages and disadvantages associated with them and summarises the government's proposed legislative reform to facilitate CDC schemes in the UK.How do CDC schemes work?One of the main aims of a CDC scheme is to supply funds sufficient...
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Pensions warranties—defined contribution scheme—share purchase agreement Replace Schedule 4, paragraph 19 of Precedent: Share purchase agreement—pro-buyer—corporate seller—conditional—long form with the following: 1 Pensions 1.1 Except as provided for by the Pension Scheme, the Company is not and has never participated in an arrangement or agreement to provide pensions, annuities, lump sums, gratuities or similar benefits on retirement, long-term ill-health or death, or pursuant to a pension sharing order, in relation to the service or historic service of a present or former employee of the Company or any other person, or for the benefit of that individual’s dependents. 1.2 All benefits under the Pension Scheme are provided on a money purchase basis. No assurance, guarantee or promise has been made to any employee of the Company as to the amount of benefits to be provided under the Pension Scheme. 1.3 Copies of the following documents have been Fairly Disclosed to the Buyer: 1.3.1 the governing documentation of the Pension Scheme including the trust deed and rules and all ancillary and...
Pensions warranties—group personal pension scheme—share purchase agreement Replace Schedule 4, paragraph 19 of Precedent: Share purchase agreement—pro-buyer—corporate seller—conditional—long form with the following: 1 Pensions 1.1 Except as provided for by the Pension Scheme, the Company is not and has never participated in an arrangement or agreement to provide pensions, annuities, lump sums, gratuities or similar benefits on retirement, long-term ill-health or death, or pursuant to a pension sharing order, in relation to the service or historic service of a present or former employee of the Company or any other person, or for the benefit of that individual’s dependents. 1.2 The Pension Scheme is a group personal pension scheme arranged by the Company for the benefit of its employees. 1.3 All benefits under the Pension Scheme are provided on a money purchase basis. No assurance, guarantee or promise has been made to any current or former employee of the Company or any other person as to the amount of benefits to be provided under the Pension Scheme. 1.4 Copies of...
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The Pensions and Lifetime Savings Association (PLSA) has published its comments on the government's response to the Mansion House reforms. These involve the Final Report of the Pensions Investment Review and three government responses to consultations on ‘Unlocking the UK Pensions Market for Growth,’ ‘Local Government Pension Scheme (England and Wales): Fit for the Future,’ and ‘Options for Defined Benefit Schemes.’ In particular, the reforms aim to accelerate the consolidation of defined contribution (DC) pension schemes, leading to fewer fragmented DC schemes, and to make significant modifications to the Local Government Pension Scheme (LGPS), including the introduction of mandatory pooling. The government reforms also include measures to introduce defined benefit (DB) surplus flexibilities that would unlock surplus funds for the benefit of employers, members, and the broader economy.
The Final Report of Pensions Investment Review was published by the government on 29 May 2025. The Pensions Policy Institute (PPI) Digest published today outlines the evidence-based analysis on the reforms to the defined contribution (DC) workplace pensions market and Local Government Pension Schemes (LGPS) contained in the government's Final Report.
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