Pension news

Week ending 21 February 2020

HMRC publishes GMP equalisation tax guidance

HMRC has published a GMP equalisation newsletter which contains guidance on tax issues arising when schemes equalise benefits in line with the Lloyds Banking Group judgement. The guidance covers topics such as:

  • the annual allowance, including deferred member carve-out
  • the lifetime allowance, including fixed, primary, individual and enhanced protection.

However, HMRC is clear that this guidance does not cover any adjustments to benefits if the conversion method is being used to equalise benefits. It highlights that using this method could result in the loss of fixed protection or the deferred member carve-out.

In summary, the guidance states that any increases to benefits solely to equalise them with regard to GMPs would not be classed as benefit accrual. This is because such increases relate to GMP accrued between 17 May 1990 and 5 April 1997. These adjustments would generally not be classed as new accrual and therefore should not be counted for annual allowance purposes or cause a member to lose their lifetime allowance protection. These adjustments could have an impact on the amount of any previous and future benefit crystallisation events and such events may need to be recalculated and corrected, along with any accounting for tax returns with amended LTA charges.

HMRC is continuing to work on further guidance to cover lump sum and death benefit payments and the tax implications of using the conversion method to equalise GMP benefits.

BAE Systems accelerates deficit contributions

The Trustee of BAE Systems main defined benefit scheme has agreed the outcome of the valuation of the BAE Systems section at 31 October 2019 (the section was formed from the merger of four separate schemes on 1 October 2019). In response to a £1.9 billion deficit, the Company will pay £1 billion in contributions over the coming months, which represents an acceleration of deficit contributions that would otherwise have been payable in the period to 2026 under the pre-merger recovery plans of all four merging schemes. In addition, the Company has committed to pay c.£240m by 31 March 2020 and a further c.£250 million by 31 March 2021.

Second buy-in for PACE

The Co-operative Pension Scheme (PACE) has secured a £1 billion buy-in, covering around 7,000 members, with Pension Insurance Corporation. This follows the scheme’s first buy-in of a similar size with Aviva, which was announced in January 2020. The Somerfield Pension Scheme, which Co-op also sponsors, agreed a £425 million buy-in with PIC in January 2019.

Recent publications


25 September 2020

In the news this week, the CMI asks for industry views on how to allow for 2020’s mortality experience, the DWP launches a small pots working group, the autumn Budget is abandoned but the Chancellor announces new measures to help businesses, the Barclays scheme subscribes to a Barclays bond and there is another repeat buy-in.


Endgame planning

Journey plans or glide paths may have been around for a long time but they’re at the heart of the Regulator’s proposed new funding code. In this Pensions Perspective, Leonard Bowman looks at how long-term funding and investment plans are evolving and explains why companies are increasingly taking the lead in designing an endgame strategy for their schemes.


Pensions Arena July 2020

This quarter’s Arena has a summary of our recent Pensions Perspective, “Emerging from lockdown”, which looked at how best to tackle the most common pension issues which companies are currently facing. It also shows all the usual financial and investment analysis for the quarter ending 30 June 2020.


Emerging from lockdown

As we keep hearing, we are living in unprecedented times. However, as we turn our attention to the future, what does the “new normal” mean for defined benefit pension schemes? In this Pensions Perspective, Leonard Bowman considers the most common pension issues that companies are facing and how best to ensure that the company approaches these on the front foot.


Getting buyout ready

Covid-19 has created many challenges for DB schemes but, for those ready to transact in 2020, it may have created even more favourable market conditions for a buyout. The problem is that most schemes are not there yet. In this Briefing we look at what being “deal ready” actually means and what work it will involve.

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