An occupational pension scheme which incorporates both defined benefit and defined contribution elements of benefit provision.
The scheme either has both defined benefit and defined contribution sections, or the pension benefits can be worked out in two ways, with the higher benefits being used.
Ways of accruing pension benefitsThere are a variety of possible pension arrangements for employees. The main options include:•occupational pension schemes•personal pension schemes•employer-financed retirement benefits schemes (EFRBS)•master trusts (including the National Employment Savings Trust (NEST) since October 2012)•the state pensionEmployees may be members of and contribute to more than one pension arrangement at the same time eg the employer's occupational pension scheme and the employee's own personal pension scheme.Occupational pension schemesOccupational pension schemes can be set up as:•defined benefit (DB) schemes•defined contribution (DC) schemes•hybrid schemes•mixed benefit schemes•cash balance schemes•small self-administered schemes (SSASs)•sectionalised pension schemesOccupational pension schemes (whether DB or DC) may also provide a facility for employees to top-up their benefits by paying additional voluntary contribution (AVCs) to the scheme (ie in addition to the ordinary contributions they are required to make under the scheme rules).The two main types of defined benefit schemes are:•final salary•career average revalued earnings (CARE)Defined benefit—final salary schemesIn defined benefit schemes, employees' benefits are defined in the scheme rules. In a final salary scheme, benefits are calculated by reference to a proportion of their final pensionable salary for each year of pensionable service ie employees accrue a proportion of their final pensionable salary in pension for each year of pensionable service (known as
FORTHCOMING DEVELOPMENT: On 8 September 2021 the Department for Work and Pensions (DWP) published a consultation on draft regulations which (i) make proposed changes to the notifiable events under the primary notifiable events regime (under section 69 of the Pensions Act 2004 (PA 2004)), and (ii) detail the type of events that will be subject to the secondary notifiable events regime (under PA 2004, 69A).More specifically, in respect of the primary notifiable events regime, the draft regulations propose two additional notifiable events: (i) the intended sale by the employer of a material proportion of its business or assets, in respect of which a decision in principle has been reached; and (ii) the intended granting or extending of a relevant security by the employer over its assets (a decision in principle by the employer to grant or extend a relevant security over its assets, such that, should the employer become insolvent, the secured creditor would be ranked above the scheme in the order of priority for debt recovery). The draft regulations also set out the removal of the existing notifiable event of wrongful trading.In respect of the secondary notifiable events regime, the draft proposes that there should be three notifiable events: the two new notifiable events mentioned above plus an existing one (the intended relinquishing of control
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Pensions analysis: In January 2022, the Department for Work and Pensions (DWP) published a consultation and an ‘indicative’ set of draft dashboards regulations (the Draft Pensions Dashboards Regulations 2022) for occupational pension schemes. The pensions dashboard is intended to be an online platform for individuals to access information about (most or all of) their pensions in one place, it is hoped that they will help improve people’s understanding and engagement with pensions. Charlotte Cartwright, partner and Catherine Salafia, principal associate PSL, at Eversheds Sutherland, analyse the response to the consultation on the Draft Pensions Dashboards Regulations 2022.
Welcome to the Pensions weekly highlights from the Pensions team. This week's edition of Pensions highlights includes a review of key news stories, as well as dates for your diary and trackers.
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