The Pension Schemes Act 2015, part of the government’s reform of private pensions, received Royal Assent on March 3.

The Pension Schemes Act 2015, part of the government’s reform of private pensions, received Royal Assent on March 3.

Provisions of the law, which took effect on April 6, include more flexibility for the individual, expanded options for shared risk in pension plans, and new requirements for advising individuals. The law also contains changes first introduced by the Taxation of Pensions Act 2014, which gave defined contribution (DC) plan members more flexibility in accessing their benefits. (Defined benefit (DB) plans must transfer to a DC plan to be eligible for this option.)

Provisions of the 2015 Act include

Changing the rules on transferring funds and creating three new categories of benefits:

  1. money purchase (essentially DC),
  2. shared risk, also called “Defined Ambition” by the government (flexible benefits other than money purchase benefits), and
  3. final salary and career average benefits that are not flexible.

A member with different categories of benefits in the same plan may transfer his or her funds in one category to another plan and leave the funds in any other category in the original plan.

Creating new definitions of private pension according to the “pension promise.” A DB plan provides a specific replacement rate at a specific age. A shared risk plan has a pension promise that applies to a portion of the benefit (retirement pension or a lump sum benefit). A DC plan has no pension promise.

Establishing the framework for “collective benefits.” Once the regulations are set, occupational and personal pension plans will allow members (and other parties, including employers) to pool different types of risk.

Requiring a DB plan member to seek “appropriate independent advice” before he or she transfers funds to a DC plan. This requirement will apply to transfers of at least £30,000 (US$46,298). Plan trustees must verify that members have received appropriate independent advice.

Setting up a new free service called Pension Wise that provides impartial advice on the different retirement options. The service is run by the Pensions Advisory Service and Citizens Advice Bureau.


“Pension Schemes Act,” 2015; “Freedom and Choice in Pensions: It’s Just around the Corner,” Bond Dick-inson Pensions Newsletter, March 2015; “Our Guide to the Pension Schemes Act 2015,” Lane, Clark & Peacock LLP, March 2015; “Pension Schemes Act 2015,” Hymans Robertson, March 2015; “UK: Pensions Scheme Act 2015,” Mondaq, April 7, 2015. Df – df