This year will be memorable. There will be political drama from November's US presidential election and sporting excitement in June and July with the UEFA European Championships in France and August's Olympic Games in Rio de Janeiro. 2016 also promises to be another eventful year in pensions.

In this briefing, we look at six big issues that will drive the pensions agenda in 2016. We also suggest what, if anything, you need to think about or start doing to be as prepared as possible.

It will be an important year for Wragge Lawrence Graham & Co (WLG). Early in the year, WLG and Gowlings, a leading Canadian law firm, are joining forces to create a new international law firm called Gowling WLG. While the name is changing, the current WLG Pensions team will remain the same.

We will carry on working with you to achieve the best results. We will also have a wider range of international pensions expertise within the firm and deeper experience of pension plan investments in certain areas, such as direct infrastructure investments. We look forward to helping you make 2016 as successful as possible.

Read on for our round-up of the pensions issues to watch in 2016:

  1. Budget 2016 and the future of pension taxation
  2. Referendum on UK membership of the European Union
  3. Introduction of The Pension Regulator's new DC Code and related guidance
  4. Interest rate rises and the impact on pension plan finances
  5. Financial Advice Markets Review
  6. End of DB contracting out and the introduction of the single tier state pension

1 Budget 2016 and the future of pension taxation

On 16 March 2016, George Osborne will stand at the dispatch box to deliver his annual Budget Speech. In the pensions world, all ears will be listening out for the Government's decision on the future of pension taxation. Will tax relief on contributions be abolished, as predicted by the Financial Times, as we move to a pension ISA system? Or will the Chancellor opt for a fixed tax relief model? There is always the chance that Mr Osborne will decide to leave things as they stand.

What do you need to do?

You don't need to wait for the outcome of the Budget to check whether your payroll and administration systems might cope with a change. Ask your providers if they will be ready to update the systems that you rely on, following the Budget Speech.

2 Referendum on UK membership of the European Union

This year could be the year that we go to the polls to decide the future of Britain's relationship with the European Union (EU). Even if the date of the poll slips into 2017, the news agenda will be increasingly focused on the debate. The House of Commons' detailed research paper on the policy consequences of a UK exit from the EU suggested a limited direct impact on pensions. It did, however, highlight the uncertainty, risk and volatility that will affect markets in the run up to Britain's decision. As we edge closer to polling day, market turbulence could have a material impact on plan investments.

What do you need to do?

Speak to investment managers to make sure they have a plan to deal with market volatility in the run up to the referendum. Consider currency hedging and exposure to non-Sterling-denominated investments and, as the polling date draws closer, diarise meetings to discuss plan risks and next steps (especially if it looks possible or likely that Britain will vote to leave the EU).

3 Introduction of The Pension Regulator's new DC Code and related guidance

In June 2016, The Pension Regulator's new Code of Practice on DC governance (the Code) is expected to be implemented. Compliance with the Code itself should not present too many challenges for employers and defined contribution plans offering money purchase occupational pension saving. But The Pensions Regulator will also issue a raft of guidance to supplement the Code. With all of the new members brought into pension saving through automatic enrolment, 2016 will see a relentless focus on both governance and value for money.

What do you need to do?

If you are involved in occupational pension plans that provide money purchase benefits, make sure you are up-to-speed on the current draft of The Pension Regulator's proposed DC Code. Schedule time at the next trustee meeting to discuss plan governance and the steps you will take in 2016 to raise this up the agenda.

4 Interest rate rises and the impact on pension plan finances

Will the Bank of England raise interest rates in 2016? It is more than eight years since the last interest rate rise in the UK. Many pundits expect a rise late in 2016 or early in 2017. Will this have a material impact on pension plans? Even if there is a rise in interest rates in 2016, it seems unlikely it will be followed by many more. Using Bank governor Mark Carney's own words, the UK is likely to remain in a "low for long" world for the rest of 2016 and beyond. However, any upward movement on interest rates could have a positive impact on pension plan deficits as bond yields improve.

What do you need to do?

Ask your investment consultants to cover this issue at their next update or presentation. Their research teams should have considered the impact of an interest rate rise on plan investments and will be well-placed to answer questions on what it means for your plan.

5 Financial Advice Markets Review

In August 2015, the Government announced the start of a review of financial advice markets. This will be led by the Financial Conduct Authority (FCA), with HM Treasury also playing a key role.

HM Treasury and the FCA have promised to publish their recommendations for changes to pension advice and guidance in time for Budget 2016. The recommendations will cover the regulatory legal framework governing the provision of financial advice and guidance to members, whether members have access to the information, advice and guidance that they require to make effective decisions and the effectiveness of publically funded guidance services such as Pension Wise.

As 2016 progresses, we expect the FCA, HM Treasury and The Pensions Regulator to consider whether more guidance is needed to help and protect pension plan members.

What do you need to do?

Trustees and employers will need to consider the recommendations arising from the Review. They may need to adapt processes and redraft communications.

6 End of DB contracting out and the introduction of the single tier state pension

The end of Defined Benefit (DB) contracting out on 5 April 2016 brings many challenges for plans and their sponsoring employers. Provision of final salary benefits will become more expensive as both members and employers see rises in their National Insurance deductions (by 1.8% and 3% respectively). Benefit change exercises have been a common feature in 2015 and this is likely to extend into 2016 as employers look for ways to reduce costs and limit the growth of liabilities and risk.

The clock is also ticking for the process of reconciling Guaranteed Minimum Pensions (GMPs). With limited resources available at HMRC, the pensions industry and their clients will have to devote significant time and resources to the process.

In addition, the move to a single-tier state pension will require some attention. Employers will have to communicate on what the end of contracting out means for employees and the industry as a whole will have another big job educating the UK's workforce on what the single-tier state pension means for them.

What do you need to do?

If your plan has GMPs but has not yet started to reconcile them, this process will be a priority. Employers and plans will need to consider how to pay for the increase in costs to DB pension provision and how to communicate any changes to members. Employers may also want to focus on how to make their final salary plans more affordable in the long run by considering benefit change exercises.

What else should you look out for in 2016?

These were our pick of six issues to focus on in 2016. But there will be plenty of other things to keep trustees, employers, advisors and administrators busy for the rest of the year. Here are some of the other things you will need to watch out for in 2016.

Higher earners, the tapering of annual allowance and cash alternatives to pensions

On 6 April 2016, a new tapered annual allowance will kick in, potentially reducing the annual allowance for higher earners. We expect this will result in a lot of focus on cash alternatives to pensions as HR and benefit managers consider whether pensions remain an effective tool for remunerating higher earners.

In addition, 6 April 2016 will mark the start of the new tax year, with aligned Pension Input Periods for all occupational pension plans.

Changes to limits and thresholds for workplace pension reform (automatic enrolment)

The Department for Work and Pensions has published a review into the automatic enrolment earnings trigger and qualifying earnings band for 2016/17. This confirms the thresholds and limits that will apply from 6 April 2016:

  • Automatic enrolment earnings trigger - will remain unchanged at £10,000;
  • Qualifying earnings band (lower limit) - will remain unchanged at £5,824; and
  • Qualifying earnings band (upper limit) - will go up from £42,385 to £43,000.

Automatic enrolment hits 100,000 small and micro employers

2016 will see a big test for workplace pension reform, as thousands of smaller employers face complying with the regime. Capacity, communications and compliance will be the key issues facing The Pensions Regulator and the advisor community as they seek to help smaller employers to comply.

Secondary annuity market rules to be prepared, consulted on and finalised

The Government has confirmed that legislation to introduce a secondary annuity market will go into effect on 6 April 2017. This means that HM Treasury will spend much of 2016 preparing the legislation and guidance, consulting on the reforms and then introducing the final legislation.

Salary sacrifice under scrutiny

In November 2015's Budget Statement, it was noted that "government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary". Expect to see more on this as the year progresses. Any policy announcements are likely to come as part of Budget 2016.

VAT and professional advice for pension plans

HMRC was kept busy in 2015 by considering the issue of employers reclaiming VAT for professional advice given to pension plan trustees. Towards the end of last year, HMRC extended the transitional period until the end of 2016. Expect to see further guidance from HMRC, together with a raft of commentary from the pensions industry.

LGPS and pooling of investments

For anyone involved in the Local Government Pension Scheme (LGPS), 2016 will be dominated by the move towards the pooling of investments. The Department for Communities and Local Government issued a consultation document on changes to the LGPS investment regulation which closes for comments on 19 February 2016. Expect plenty of work for the first half of the year, as funds race towards the deadline of 15 July 2016 to submit final proposals to the Government on pooling.

Introduction of the National Living Wage for workers aged 25 and over

On 6 April 2016, the National Minimum Wage will be replaced by the National Living Wage for workers aged 25 and over. For these workers, the current National Minimum Wage of £6.50 per hour will move to the National Living Wage at £7.20 per hour. It is planned for this to increase to £9 per hour by 2020. To make things even more complicated, expect plenty of coverage on the difference between the rate published by the Living Wage Foundation (£7.85 per hour in the UK except London and £9.15 per hour in London).

Cases to look out for in 2016

Briggs and others v Gleeds and others (executing deeds and changing scheme rules)

The High Court decision in Gleeds is being appealed in the Court of Appeal. In 2014, the High Court ruled that a series of deeds of amendment executed over the course of 20 years were invalid on the basis that they were not effective as deeds. Claims that the changes made by the deeds were effective through estoppel or extrinsic contracts were rejected. This looks set to be a key decision on how schemes make changes to their rules.

Safeway Ltd v Newton and another (equalisation)

This case will focus on the equalisation of pension benefits and looks set to consider the High Court decision in Harland and Wolff Pension Trustees Ltd v AON Consulting Financial Services Ltd. To a degree a case that depends on its own facts, there may be elements of the decision that will be of wider relevance to how pension schemes equalised in the wake of the Barber judgement.

Buckinghamshire and others v Barnardo's (RPI / CPI)

In 2015, the High Court held that the rules governing an employer's defined benefit pension plan did not give the trustees power to switch from using the Retail Prices Index (RPI) to the Consumer Prices Index (CPI), so long as RPI remained an officially published index. This applied to the revaluing of deferred pensions and the indexing pensions in payment. This has been appealed, so we expect a useful Court of Appeal ruling on this issue in 2016; in particular considering how, if at all, section 67 of the Pensions Act 1995 affects any such proposed change.

IBM United Kingdom Holdings Ltd and another v Dalgleish and others

IBM continues to rumble through the UK court system. Leave to appeal the High Court judgments on breach and remedies were granted in June 2015. These are supposed to be heard by March 2016, but we will have to wait and see whether the court actually has enough time in 2016 to hear this mammoth piece of litigation.

Also expected to come before the courts in 2016, but covering far more specific areas, are:

  • Hampshire v the Board of the Pension Protection Fund (PPF and the EU Insolvency Directive)
  • Heis and others v MF Global UK Services Ltd (implied contracts and section 75 debts)
  • Horton (as Trustee in Bankruptcy of Michael Gerard Henry) v Henry (bankruptcy and income payments order)