The Department for Work and Pensions (DWP) has today published a consultation on draft regulations which would enable bulk transfers of formerly contracted-out rights to schemes that have never been contracted out and without member consent. This should help facilitate scheme restructuring exercises that have been hampered since the abolition of contracting out in April 2016.
The option will be limited to transfers involving what are known as ‘connected employers’. Broadly these are where the transferring and receiving schemes are operated by the same employer or where there is a financial transaction between employers (for example in merger and acquisition activity).
The DWP appears to be wanting to introduce these regulatory amendments as soon as possible. The provisional effective date is 6 April 2018, and the consultation period is consequently short – responses need to be submitted by 17 January 2018.
Under the proposed regulations, a condition of the transfer will be that the benefits being transferred are not adversely affected. Where rights to Guaranteed Minimum Pensions (GMPs) are involved, the receiving scheme will need to comply with the same legislative requirements as formerly contracted-out schemes. It is on the detail around the appropriate extent and wording of these protections that the consultation process is likely to focus.