Pensions Bulletin 2017/01

Our viewpoint

IORP II Directive finalised

The “IORP II” Directive was approved by the European Parliament and Council and published in the Official Journal of the European Union in December.  It becomes EU law on 13 January 2017.  Member states (which still include the UK) have until 13 January 2019 to implement the Directive in national law.

For further details of the Directive please see our LCP guide.


Our working assumption is that, despite Brexit, IORP II will be implemented in the UK from towards the end of 2018.  IORP II is a significant piece of pensions legislation, compliance with which will be a substantial exercise for schemes.

TPAS launches online pension scam guidance tool

To welcome in the New Year the Pensions Advisory Service has launched a self-service website tool giving information and guidance to pension scheme members who may initially be too worried or embarrassed to express their concerns to others regarding a potential scam.  TPAS also hopes that pension providers will direct their customers to it and, in so doing, help to disrupt scammers – especially at the point of a questionable transfer.

The online tool asks a few simple questions and then suggests next steps, ranging from “try not to worry too much” where a regulated financial adviser has been involved, to “call your pension provider immediately and stop any transfers from happening … please call our team” where the potential transfer is likely to be a scam.


This simple to use tool could give pension scheme members a certain level of comfort that they are doing the right thing, or if they need to take action.  But it will be a big task for TPAS to keep the right balance between the tool being used, not too heavily relied upon, and kept up to date with new scammer tactics.

Three months left to remove the GMP revaluation underpin problem

When schemes were forced to contract back in on 6 April 2016, legislation was amended so that for those still in active service GMPs would continue to revalue from this point in line with section 148 Orders until pensionable service ended at which point the scheme’s chosen revaluation method would kick in – typically fixed rate.

However, many schemes found themselves having to provide fixed rate revaluation from 6 April 2016 for members still in active service, because their scheme rules required them to do so from when contracting-out ended.  This, together with the amended legislation, introduced an unwanted GMP revaluation underpin operating from 6 April 2016.

A solution to this underpin problem was delivered via a set of modification regulations under which schemes could elect to modify their rules so as to override the fixed rate aspect.  Although of particular assistance to those schemes with restricted amendment powers, the regulations are a time-limited opportunity which runs out on 5 April 2017.

The modification regulations also provide for such a change to have retrospective effect and for consultation with members to not be required.  So they could be of wider use – especially where the change was not made in time for 6 April 2016.


Schemes that operate fixed rate GMP revaluation after a member leaves pensionable service should check that they have addressed the underpin problem.  If they have not, they have only three months left, if they wish to take advantage of the modification regulations solution.

Time is starting to run out to make Class 3A contributions

At the same time as the Coalition Government put through its landmark reform to the State Pension, it also legislated for a time-limited opportunity for those who, having reached State Pension Age prior to 6 April 2016, would not benefit from the reforms.

Funded through a new Class 3A of voluntary national insurance contributions, this facility has been available since 12 October 2015, but has a cut-off date of the later of 5 April 2017 and a 30-day period beginning with the day that the individual is sent information about Class 3A NICs by HMRC in response to a request made before 6 April 2017.

Individuals can purchase additional State Second Pension rights of up to £25 a week (in multiples of £1 per week).  In so doing they can top up their pension in a way that will protect them from inflation and offer protection to surviving spouses.

The DWP has published a booklet for potential applicants and guidance for pension advisers.  A personal calculator is also available.


This facility could help women, and those who have been self-employed, who tend to have a low State Second Pension entitlement.  However, for those with gaps in their Basic State Pension contribution record it is much better for them first of all to plug this using the Class 3 voluntary contribution facility whose price is “well below the actuarial rate”.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.

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