UK Pensions Trustee Agenda

Transcription

1 Winter 2015 UK Pensions Trustee Agenda In this issue: > > Annual allowance changes: How they work > > DC Governance: Employer obligations and DC investment choices > > Protected pension ages a reminder of the requirements > > VAT on pension costs: Current position > > Transferring personal data to the US: Does it comply with EU law? > > On the horizon > > Contacts Welcome This edition of Trustee Agenda focuses on the areas we have been most frequently asked about during the last quarter the Annual Allowance changes, DC governance, protected pension ages (and the conditions which must be satisfied to take benefits before age 55), VAT on pension costs and data transfers. We hope that it provides a useful resource for inclusion in trustee meeting packs and also that it will cast light on, amongst other things, the labyrinthine complexities of pension input periods! In our next edition of Trustee Agenda we plan to put the spotlight on incentive exercises and practical issues for trustees in connection with the new flexibilities. Claire Petheram Partner UK Pensions Trustee Agenda linklaters.com 01

2 Annual allowance changes: How they work The annual allowance changes announced in this year s Summer Budget have now received Royal Assent. The changes are twofold: > > the tapering of the annual allowance for high income individuals; and > > the alignment of pension input periods with tax years. Both of these come into effect on 6 April Before exploring them further, it is worth taking a brief look at the annual allowance as it stands today. A member s pension input amount under a given pension arrangement depends largely on the arrangement concerned. Annual allowance: Background Overview The annual allowance is, in very broad terms, the level of pension savings that a member can build up on a tax-efficient basis over a 12-month period. If a member exceeds the annual allowance in relation to a given tax year, he generally becomes liable to a tax charge on the excess. The annual allowance was originally set at a high enough level for there to be little chance in most circumstances of a member ever exceeding it. It was reduced to 50,000 from 6 April 2011, and was further reduced to its current level of 40,000 from 6 April Members who have already accessed the new defined contribution ( DC ) flexibilities There is one specific group for whom the position is more restrictive than that. These are the members who have already accessed any of the new DC flexibilities that were introduced on 6 April For these people the 40,000 annual allowance remains, but only 10,000 of that figure can be used for money purchase contributions in this or any future year. These individuals are affected rather differently from other members by the latest round of changes. They are a small minority, however, and so we do not consider the impact on them further here. When does a member exceed the annual allowance? A member exceeds the annual allowance in respect of a given tax year if his total pension input amount across all registered pension schemes exceeds the annual allowance available to him. A member s pension input amount under a given pension arrangement depends largely on the arrangement concerned: > > In a DC arrangement, a member s pension input amount is broadly speaking the amount of his, and his employer s, contributions into the scheme in respect of him during the pension input period that ends in that tax year. UK Pensions Trustee Agenda linklaters.com 02

3 > > In a defined benefits ( DB ) arrangement, the calculation is far more complicated. In very broad terms, it can be seen as the growth in the member s prospective annual pension (after making some allowance for inflation) over the pension input period that ends in that tax year, multiplied by a factor of 16. We shall say more about pension input periods later on. Carry forward A member who has exceeded the annual allowance for the tax year concerned will not necessarily incur an annual allowance tax charge. This is because of the ability to carry forward any unused annual allowance from the three preceding tax years. This is likely to be of particular interest to those members who see their annual allowance tapered down below 40,000 from 6 April We shall return to carry forward at the end. Tapering of the annual allowance for high income individuals Who is affected? The tapering affects high income individuals. This means anyone: > > whose adjusted income for the tax year exceeds 150,000; AND > > whose threshold income for the tax year exceeds 110,000. Income calculations This immediately raises the question of how adjusted income and threshold income are calculated. The main differences between them are in the way that they treat contributions, as shown in this table: Starting point Members contributions Employer s contributions Adjusted income (over 150k to be a high income individual) Threshold income (over 110k to be a high income individual) Income (after deductions) on which the member is charged to income tax. Adjust calculation to include them. Add these on (i.e. add on the total pension input amount less the member s own contributions). Adjust calculation to exclude them. Only add these on if they arise from post-8 July 2015 salary sacrifice arrangements (i.e. add on what the member has given up for employer contributions under those arrangements). Tapering The effect of tapering is to reduce the member s annual allowance from 40,000 by 1 for each 2 that his adjusted income exceeds 150,000 tapering down to a minimum annual allowance of 10,000 for those with an adjusted annual income of 210,000 or more. Specific issues These changes raise a number of issues: > > It may be impossible until the end of the tax year to know whether someone is a high income individual, or how far the tapering will bite. This makes it difficult for a DC member to know the most that he can contribute without exceeding his annual allowance. The safest course may be to err on the side of caution (i.e. contribute on the basis that the allowance for the year will be lower rather than higher), and carry forward any shortfall (once the annual allowance is known) to the following tax year. > > This will similarly affect employers who have agreed to cap DC contributions at the member s annual allowance. It also raises benefits calculation issues for the trustees and administrators of those DB schemes which restrict benefit accrual so as not to trigger an annual allowance charge. UK Pensions Trustee Agenda linklaters.com 03

4 > > A further concern here for employers and trustees is that they will not necessarily know what the member s taxable income is (and so be unable to calculate either his adjusted or threshold income). This is because the member may have income from an entirely separate source (e.g. rent) which the employer knows nothing about. The best way of dealing with this will depend on what the scheme rules say, and the way in which they restrict the contributions or benefits to the member s annual allowance. > > The interaction between: - the two income calculations; and - the contributions; requires some care. Not only may the income calculations influence the amount that a DC member (and his employer) pays into the scheme, but amount of those contributions will in turn affect the two income calculations! All PIPs are now being brought into line with the tax year. Alignment of pension input periods Background Every pension arrangement in respect of a member has a pension input period (or PIP ). In most cases, it lasts for 12 months and can end on any date in the calendar year. Where a member stands in relation to his annual allowance for a given tax year depends on his aggregate pension accrual (under DB schemes) plus contributions paid (to DC schemes) during all his pension arrangements PIPs that end during that tax year. All PIPs to end on 5 April All PIPs are now being brought into line with the tax year. To achieve this: > > every PIP that was in progress on the day of the Summer Budget (8 July 2015) ended on that date; and > > a new PIP then started the following day (9 July 2015) which will end on the final day of the current tax year (5 April 2016). From then on, all PIPs will run to 5 April in every year. Calculation issues for the current tax year Changing PIPs in this way for the current tax year inevitably raises calculation issues. To address these, the amount of the annual allowance for the tax year 2015/2016 is described to be broadly as follows: > > an aggregate of 80,000 (plus any available carry-forward of unused annual allowance from the three previous tax years), for all PIPs ending between 6 April 2015 and 8 July 2015 (inclusive); and > > any unused amount of that 80,000 (plus carry-forward) but capped at 40,000 for all PIPs running from 9 July 2015 to 5 April Examples Let us imagine that a member has only one pension arrangement and has no unused annual allowance that he can carry forward from previous years. The way in which these changes affect that member vary depending on whether: > > the PIP end date until now has fallen during the part of the tax year that precedes 9 July (see Example 1); > > the PIP end date until now has fallen during the part of the tax year that follows 8 July (see Example 2); or > > the PIP is already aligned with the tax year (see Example 3). UK Pensions Trustee Agenda linklaters.com 04

5 Example 1: PIP ending on 31 May Had no changes been made, the annual allowance treatment would have been as shown here: 31/5/14 6/4/15 31/5/15 5/4/16 AA: 40,000 However, the effect of the changes is as follows: 31/5/14 6/4/15 31/5/15 Budget 5/4/16 AA: 80,000 AA: 40,000 AA: 80,000 Note: In all these diagrams: > > the coloured area represents the current tax year (2015/16); > > vertical dotted lines indicate the end of a PIP; and > > Budget means 8 July 2015 (the date of the Summer Budget ). The reason for allowing up to 80,000 in respect of the period from 1 June 2014 to 8 June 2015 is that a member might, within the existing annual allowance rules, have put that amount of money into the scheme during that period (all of which precedes the Budget) anyway. This would happen if the member had used his full 40,000 during the PIP that ended on 31 May 2015 and then, during the first few weeks of the new PIP, used his entire 40,000 annual allowance for that new PIP upfront. At first sight the 40,000 allowable from the Budget to the end of the current tax year looks high as it relates to less than a 12-month period. However, this amount is constrained by the overarching 80,000 limit which covers the whole period from 1 June 2014 to 5 April Example 2: PIP ending on 31 December Had no changes been made, the annual allowance treatment would have been as shown here: 31/12/14 6/4/15 31/12/15 5/4/16 AA: 40,000 However, the effect of the changes is as follows: 31/12/14 6/4/15 Budget 31/12/15 5/4/16 AA: 80,000 AA: 40,000 AA: 80,000 The justification for these figures is, to some extent, to maintain parity with Example 1. We comment further on this in the context of Example 3 (coming up next) which illustrates the position more starkly. UK Pensions Trustee Agenda linklaters.com 05

6 Example 3: PIP ending on 5 April Had no changes been made, the annual allowance treatment would have been as shown here: 6/4/15 5/4/16 AA: 40,000 However, the effect of the changes is as follows: 6/4/15 Budget 5/4/16 AA: 80,000 AA: 40,000 AA: 80,000 At first sight, this looks surprising. Even though the legislation is making no change to the member s PIP (which is already aligned with the tax year), he is benefiting from transitional provisions which increase his annual allowance for the current tax year from 40,000 to (potentially at least) 80,000! This does, however, achieve some level of consistency with the treatment in Example 1. We saw there that a member whose PIP ends shortly after 5 April (in that case, 31 May) could have a 2015/16 annual allowance of up to 80,000. It would be difficult to justify extending this treatment to some members but not others, on the arbitrary basis when their existing PIPs fell. Obstacles to using the full 80,000 None of these three examples means that a member can use the full 80,000 for 2015/16 in every case. In many instances it will be impossible to do so. Let us take, for instance, Example 3. A DC member would need contributions to have been paid of at least 40,000 during the 3 months from 6 April 2015 to 8 July 2015 (the Summer Budget), in order to use the full 80,000. This is unlikely in the normal course of events to have happened. Similarly, a DB member wanting to use the full 80,000 (with no annual allowance charge) would need to use up 40,000 of annual allowance during the PIP that ends on Budget day. In Example 3, this is arithmetically impossible: the legislation deems his DB benefits to have accrued at a uniform daily rate throughout the two PIPs that end on Budget day (8 July 2015) and 5 April 2016 respectively. The first of these PIPs would need to be at least as long as the second (i.e. just under 9 months), to accommodate accrual of 40,000. Carry forward From 6 April 2016, people will still be able to carry forward any unused annual allowances from the three previous tax years. However, one of those three previous tax years (i.e. the current one) will have been subject to the complex transitional annual allowance provisions described above. The way this will work, for a member wanting to carry forward to the next tax year (2016/17) will be as follows: Tax year Amount that can be carried forward 2013/ ,000, less amount of that annual allowance used up for that year. 2014/ ,000, less the amount of that annual allowance used up for that year. 2015/2016 The amount of the annual allowance that was available to the member for the period from 9 July 2015 to 5 April 2016, less the amount of that figure used up for that 9-month period. Even a member whose annual allowance is restricted in 2016/17 as a result of tapering will be able to carry forward on this basis. UK Pensions Trustee Agenda linklaters.com 06

7 DC Governance: Employer obligations and DC investment choices ABC Limited offers two forms of pension provision for its employees a master trust arrangement for its weekly paid staff and a group personal pension arrangement set up under contract for its monthly paid staff. ABC Limited recently asked us to advise in relation to its ongoing employer obligations around selecting and reviewing DC investment options in different types of pension arrangement. This article provides some general guidance in this area. However, the ultimate investment decisions, including number and range of funds, are made by the trustee of the master trust, as professional trustee attached to the provider, rather than the employer. There are no specific statutory regulations governing the responsibilities or behaviour of an employer in relation to scheme design or default investment options, although the auto enrolment legislation does require employers to auto enrol eligible jobholders into a qualifying scheme and pay a minimum level of contributions in respect of them. Any scheme that is used for automatic enrolment must have a default arrangement but there are no statutory obligations on employers specifically in relation to the default itself. That is not to say, however, that there is no role to play for employers in relation to selecting and reviewing the DC investment options, whether it be for a master trust or a group personal pension arrangement set up under contract. Taking each of them in turn: DC arrangements set up under trust Under a DC pension scheme set up under trust, it is the scheme s trustees who have responsibility for selecting, reviewing, monitoring and, if necessary, removing default funds and self select investment funds available to members. Investment decisions are ultimately the responsibility of the trustees. However, trustees typically have an obligation to consult the employer in relation to reviewing and revising the scheme s statement of investment principles. Master trusts Master trusts are DC pension schemes set up under trust by a provider, typically an insurer, for non-associated employers. Depending on how the master trust is set up, responsibilities may differ as between the trustee/provider/participating employers. Rules of master trusts are typically drafted so that the master trust allows the employer to choose options available to its employees. However, the ultimate investment decisions, including number and range of funds, are made by the trustee of the master trust, as professional trustee attached to the provider, rather than the employer. Arrangements set up under contract (for example, group personal pension arrangements) In arrangements set up under contract, for example, group personal pension arrangements ( GPPs ), a policy (i.e. a contract) is created between the employee (typically referred to as the policyholder or customer) and the insurer/provider. There are no trustees and there is no direct contractual relationship between the employer and the provider in relation to the pension arrangement itself. Any changes to the GPP policy terms, including fund charges, selection and range are typically decided by the provider on notice to policyholders. UK Pensions Trustee Agenda linklaters.com 07

8 The FCA is responsible for regulating the conduct (and in some cases the financial stability) of providers establishing and operating personal pension arrangements including GPPs and self invested personal pension plans ( SIPPS ). As part of this, the FCA requires providers through its Conduct of Business Sourcebook and FCA Rules to pay due regard to the interests of their customers and treat them fairly. The FCA also regulates the sale and financial promotion of the pension products offered through and as part of the GPP or SIPP. In addition, with effect from April 2015, providers also have a new statutory obligation to establish Independent Governance Committees ( IGCs )to scrutinise governance of their pension products, to act in the interests of policyholders and to assess whether or not the provider s arrangements offer value for money for policyholders. The FCA does not, however, regulate employers with regard to selecting an automatic enrolment scheme (whether set up under contract or otherwise) and maintaining contributions in respect of relevant jobholders this is the remit of the Pensions Regulator. Setting the default option Although there is no specific statutory requirement to do so, as a matter of good/best practice, employers should be involved in setting investment options, including the default option in relation to any arrangements they offer to employees and, on the basis of investment advice, selecting the range of funds, including the default, available to members where they have the power to do so. Employers will also want to satisfy their own duty of trust and confidence towards their employees. This typically forms part of the process of (i) reviewing a statement of investment principles for employers who operate a trustbased arrangement, (ii) agreeing the benefit schedule when an employer enters into a deed of participation for a master trust or (iii) in contractual negotiations of the agreement which governs the set up of GPP policies. The Pensions Regulator s guide to automatic enrolment suggests that employers may, at the point they select a scheme for automatic enrolment, need to consider whether the scheme offers investment options that suit particular staff needs (such as ethical funds or funds that are compliant with sharia law). However, neither the Pensions Regulator, nor the FCA has to date provided any guidance on employers duties in relation to selecting the default option specifically. This is not surprising given, as noted above, the responsibility to select the default rests with the trustees/providers. Ongoing review of DC investment choices Again, there are no statutory requirements on employers to keep default arrangements or other DC investment choices under review. The statutory requirements around reviewing the default are very much on trustees in occupational pension schemes set up under trust. For providers, there are no specific equivalent governance requirements relating to the default but, as noted above, providers and pension products themselves are heavily regulated by the FCA and their governance is, from April this year, scrutinised by IGCs. However, it is considered good/best practice by the DWP/Pensions Regulator for employers to keep the default and self select options in relation to any pension arrangement it operates under regular review to ensure, as far as possible, that they meet employees needs. Employers should, however, recognise that in the case of a GPP or SIPP set up under contract, it may in practice be difficult to change default options for existing employees without their consent because of the contractual nature of the arrangement. Back in 2011, the DWP produced guidance on what it considers to be best practice in terms of an employer s involvement in selecting and reviewing work-based pension arrangements. The guidance is in some sense out-dated it was designed to pre-empt the introduction of automatic enrolment and its content has evolved into the Pensions Regulator s DC Code and guidance and more recently the new statutory DC governance requirements (both aimed at trustees). It has also to a certain extent been superseded by the introduction of the DC flexibilities. That said, the DWP has stated specifically that it remains in force, although not mandatory. UK Pensions Trustee Agenda linklaters.com 08

9 In summary, the guidance recommends: > > The roles and responsibilities of parties in relation to the default should be clearly defined and available to members on request. > > The default options should be designed with the likely membership profile in mind (this is consistent with the requirements for trustees contained in the new governance standards in the Charges and Governance Regulations 2015 and the Pension Regulator s DC Code). The guidance says that the employer should take financial advice on this after profiling the demographics of the potential members. > > Options should be monitored and reviewed once every three years to consider the charging structure, performance, suitability to membership, and the impact of any changes to the financial and regulatory environment. > > Members should be provided with clear information describing the default fund. The guidance emphasises that the quality of information is important it should be understandable and accessible and clear on how members can request further information. This reflects the statutory requirements already in place for trustees of occupational pension schemes and providers/igcs of personal pension arrangements, so the effect of the employer s role here is in practice simply to add a further level of scrutiny on the arrangements it has selected for its employees. UK Pensions Trustee Agenda linklaters.com 09

10 Protected pension ages a reminder of the requirements A member becomes entitled to their benefits when they have an actual rather than a prospective right to receive a pension. Since 6 April 2010, the normal minimum pension age has been age 55. This means that ordinarily individuals can only take their benefits before age 55 if the requirements for an incapacity pension are satisfied. However, before 6 April 2010 the normal minimum pension age was age 50, and there are circumstances where individuals could retain this or a lower minimum pension age as part of the transitional tax protections available from 6 April Conditions There are a number of conditions which must be met in order for a person to have a protected pension age. Entitlement condition On 5 April 2006, the member must have had an actual or prospective right under the pension scheme to any benefit from an age less than 55, which was in the rules of the scheme on 10 December Retirement condition The member must become entitled to all the benefits payable to them under the scheme (which did not come into payment on or before 5 April 2006) on the same date. Under the legislation, a member becomes entitled to their benefits when they have an actual rather than a prospective right to receive a pension. In our view, this is when a member crystallises their benefits i.e. he actually takes his benefits. Until then, the member would have a prospective right to benefits only. This is also the approach taken by HMRC in their guidance and the legislation on benefit crystallisation events. Re-employment condition (protected pension age between 50 55) The member must not be employed by one of the following entities after becoming entitled to benefits: (i) any person who was a sponsoring employer of the pension scheme during the six months ending with the day on which the member becomes entitled to the benefits and who employed the member during that period; (ii) any person who is connected with any such person in paragraph (i) above; or (iii) any person who is a sponsoring employer in relation to the pension scheme and with whom the member is connected, unless one of the following conditions apply: > > the member was not employed by any of the entities listed above during the period of six months beginning with the day on which the member became entitled to the benefits; UK Pensions Trustee Agenda linklaters.com 10

11 > > the member was not employed by any of the entities listed above during the period of one month beginning with the day on which the member became entitled to the benefits but was employed by one of them at some point during the next five months, provided the employment was materially different in nature from the employment in which the member was employed immediately before becoming entitled to the benefits. HMRC guidance indicates that for employment to be materially different in nature, the duties and/or level of responsibility in the new employment must be different from those in the old employment (i.e. a simple change in hours will not be a materially different employment). Re-employment condition (protected pension age of less than age 50) The member must not be employed by a person who is a sponsoring employer of the scheme and with whom the member is connected, after becoming entitled to benefits. In all cases, the member s entitlement to benefits must not be part of an arrangement where one of the main purposes is the avoidance of tax or national insurance contributions. Where members have transferred in from a scheme with a protected pension age, the transfer must be a block transfer for the protected pension age in the transferring scheme to be retained in the receiving scheme. This means that all of the benefits of at least two members in the transferring scheme must have transferred at the same time and the members must not already have been members of the receiving scheme in the previous 12 months. Points for trustees to consider Where schemes have members with protected pension ages, trustees should ensure there are processes in place to monitor the above conditions. In particular, scheme administrators should check that members: > > take all of their benefits under the scheme on the same date (including AVCs); and > > do not become re-employed by a scheme employer after they take their benefits, unless the relevant conditions are satisfied. UK Pensions Trustee Agenda linklaters.com 11

12 VAT on pension costs: Current position 31 December 2016 HMRC has confirmed that the current 30:70 split remains available for those employers who wish to make use of it (with trustee agreement) until 31 December This extends the previous deadline by an extra 12 months. Background In the PPG Holdings case, the European Court of Justice ruled that pension scheme employers could, generally speaking, recover the VAT which they paid on pension management services costs investment services included. This ruling raised issues for HMRC, whose practice has been to let employers recover VAT incurred on scheme administration costs but not on investment costs. Where a single invoice covers both types of service, HMRC s approach has been to apply a 30:70 split deeming 30% of the invoice to relate to administration services (so that 30% of the VAT is recoverable). Following the European Court s decision, HMRC published two briefing notes whose combined effect was that: > > there would no longer be a difference in the treatment of administration and investment costs, so enabling the employer to recover VAT on both. However, this requires the employer to be a party to the contract between the service provider and the trustees; > > in the meantime, HMRC s current practice (of allowing VAT to be reclaimed on the basis of a 30:70 split between administration and investment services) would remain in place until 31 December 2015; and > > further HMRC guidance would follow. Latest HMRC briefing That further guidance was published at the end of October. It can be found at This latest HMRC briefing does not resolve all the issues, and additionally raises a further key point of concern: namely, that HMRC considers that an employer who pays directly for asset management costs under an agreement to which it is a party cannot claim a corporation tax deduction on that payment. Recognising that this is a problem, HMRC has confirmed that the current 30:70 split remains available for those employers who wish to make use of it (with trustee agreement) until 31 December This extends the previous deadline by an extra 12 months. HMRC in the meantime is still considering representations that have been made to it, and say that further guidance will be published later this year. UK Pensions Trustee Agenda linklaters.com 12

13 Transferring personal data to the US: Does it comply with EU law? The message from the UK Information Commissioner is very clear: don t panic. Background: Safe Harbor EU law prevents the transfer of personal data out of the EEA, unless the country to which it is being transferred provides adequate protection or there is a specific justification for the transfer. Until now, one justification has been that the recipient is based in the US and has signed up to Safe Harbor a voluntary scheme formally recognised as providing an adequate level of protection. However, the European Court of Justice has now decided that Safe Harbor does not protect against access by the US Government. As a result, it is invalid and no longer provides a justification for transfers of personal data to the US. How does this affect UK pension schemes? The decision affects UK pension schemes where: > > the scheme, or its sponsoring UK employer, is transferring personal data to a group company in the US (typically a parent company); or > > the scheme is using a UK-based administrator, who in turn is using US-based service providers (or the scheme directly instructs a US-based administrator). If these transfers are made on the basis of Safe Harbor, it may now be necessary to find an alternative justification. This might mean using model contracts approved by the European Commission, or consent, or the replacement to Safe Harbor (if one is agreed). Don t panic A great many people and organisations are affected by this decision, of whom pension schemes form only a small contingent. Thousands of US companies have signed up to Safe Harbor and tens of thousands of European companies have relied on it to transfer data to the US. The message from the UK Information Commissioner is very clear: don t panic. The impact of the decision is still being reviewed by European regulators and the position is still uncertain. While this review is taking place, it may not be wise to rush into alternative transfer mechanisms. However, you should take stock. Are you transferring personal data to the US in reliance on Safe Harbor? Is your scheme administrator transferring your personal data to the US? (You will probably need to ask them.) If so, what is the justification? If it is Safe Harbor, what are they proposing to do to resolve the problem? In the meantime, European regulators are continuing to analyse the impact and the European Commission is trying to thrash out a new and improved Safe Harbor with the US. European regulators have given them until 31 January 2016 to do so after which they plan to investigate existing transfers. For high profile or high risk transfers, this might lead to enforcement action. This is not primarily a pensions issue, and most UK pension schemes are not using Safe Harbor anyway. For those that are, much will depend on the negotiations for a new Safe Harbor and regulatory guidance on alternate transfer justifications. UK Pensions Trustee Agenda linklaters.com 13

14 On the horizon 6 April 2016 Abolition of DB contracting-out Subject Changes Next key date Abolition of DB contracting-out Recovery of VAT on pension costs Regulations have been laid to allow schemes to prepare for the abolition of DB contracting-out from April 2016 and also regarding ongoing requirements relating to accrued contracting-out rights following the abolition of contracting-out. HMRC has published various guidance on the use of tripartite agreements (between service providers, employers and pension scheme trustees) for the recovery of fund management VAT. 6 April 2016 abolition of DB contracting-out. Employers and pension scheme trustees have until 31 December 2016, this deadline having been extended by 12 months, to adapt to the new policy on the recovery of fund management VAT. The lifetime allowance is to be reduced from 1.25 million to 1 million A single tier state pension for those reaching state pension age on or after 6 April 2016 Lifetime allowance Annual allowance Single tier state pension The lifetime allowance is to be reduced from 1.25 million to 1 million. Two new forms of protection will be introduced for those affected. Pensions tax relief to be restricted by tapering the annual allowance available for pension saving for high earners. A single tier state pension will be introduced for those reaching state pension age on or after 6 April April April April 2016 UK Pensions Trustee Agenda linklaters.com 14

15 Contacts Ruth Goldman Partner Tel: (+44) Rosalind Knowles Partner Tel: (+44) Tim Cox Partner Tel: (+44) Isabel France Partner Tel: (+44) Claire Petheram Partner Tel: (+44) linklaters.com 7434_StgF/11.15