The following Pensions guidance note provides comprehensive and up to date legal information covering:
This Practice Note focuses on theconsiderations that were applicable before 6 April 2016, thedate on which contracting-out on a salary-related basis (also known as DB contracting-out) was abolished, when 'buying out' thefollowing contracted-out salary-related (COSR) rights:
guaranteed minimum pensions (GMPs)—these are thebenefits accrued by members of COSR schemes as a consequence of contracting out between 6 April 1978 and 5 April 1997
Section 9(2B) rights (also known as post-1997 COSR rights)—these are thebenefits accrued by members of COSR schemes as a consequence of contracting out between 6 April 1997 and 5 April 2016
The legislative requirements applicable differed depending on whether thecontracted-out rights in question were GMPs or Section 9(2B) rights.
For information on thebuy-out considerations applicable from 6 April 2016 in respect of Section 9(2B) rights and GMPs, see Practice Note: Buying out Section 9(2B) rights and GMPs from 6 April 2016.
For information on buy-out issues generally, see Practice Note: De-risking—pension buy-outs and buy-ins.
For information on theabolition of DB contracting-out on 6 April 2016, see Practice Note: Abolition of DB contracting-out—an introduction.
A pension buy-out exercise involves thetrustees of a defined benefit scheme agreeing with an insurance company that, in exchange for a payment or series of payments, theinsurance company will issue individual insurance (annuity) policies to thescheme members whose benefits are to be 'bought out'.
Once theinsurance policies take effect, theindividual members will cease to be beneficiaries of thescheme. Instead, they will each have entered into a contractual relationship with theinsurance company, which will thereafter be responsible for ensuring payment of
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