Buying out Section 9(2B) rights and GMPs from 6 April 2016
Buying out Section 9(2B) rights and GMPs from 6 April 2016

The following Pensions guidance note provides comprehensive and up to date legal information covering:

  • Buying out Section 9(2B) rights and GMPs from 6 April 2016
  • What is a buy-out?
  • Differences between pre-abolition and post-abolition buy-out regimes
  • Buy-out of Section 9(2B) rights
  • Buy-out of guaranteed minimum pensions (GMPs)
  • Meaning of 'appropriate' policy or annuity contract
  • When is member consent not required to buy out GMPs?
  • Practical considerations

This Practice Note focuses on the considerations applicable on and from 6 April 2016, the date on which contracting-out on a salary-related basis (also known as DB contracting-out) was abolished, when 'buying out' the following contracted-out salary-related (COSR) rights:

  1. guaranteed minimum pensions (GMPs)—these are the benefits accrued by members of COSR schemes as a consequence of contracting out between 6 April 1978 and 5 April 1997

  2. Section 9(2B) rights (also known as post-1997 COSR rights)—these are the benefits accrued by members of COSR schemes as a consequence of contracting out between 6 April 1997 and 5 April 2016

The legislative requirements applicable differ depending on whether the COSR rights in question are GMPs or Section 9(2B) rights.

For information on the considerations applicable before 6 April 2016 for the buy-out of Section 9(2B) rights and GMPs, see Practice Note: Buying out Section 9(2B) rights and GMPs before 6 April 2016 [Archived].

For information on buy-out issues generally, see Practice Note: De-risking—pension buy-outs and buy-ins.

For information on the abolition of DB contracting-out on 6 April 2016, see Practice Note: Abolition of DB contracting-out—an introduction.

What is a buy-out?

A pension buy-out exercise involves the trustees of a defined benefit scheme agreeing with an insurance company that, in exchange for a payment or series of payments, the insurance company will issue individual insurance (annuity)