First announced at the start of 2013, the proposed reform of the UK state pension system has been accelerated by the government and is now due to take effect from April 2016. The end of ‘contracting out’ for open-to-accrual defined benefit (DB) schemes will bring some short-term complications to those that sponsor them.
Employers will therefore need act quickly to mitigate the associated increase in National Insurance (NI) costs.
The following note discusses what these changes are, their impact on the costs associated with running DB schemes and the options available to sponsors to mitigate these costs.
This note has been recently updated since Department for Work and Pensions’ (DWP) decision to block the use of statutory override for former public sector pensions.