New government proposals on pensions reform include the introduction of a ‘statutory override’ to make it easier for scheme rules to be amended.
Mike O’Brien, minister for pensions reform has issued a response to the findings of an independent review of pensions regulation carried out by Ed Sweeney and Chris Lewin in July.
Additional plans include reducing the current 5% cap on the revaluation of deferred pensions so that the maximum increase required in the value of pension rights – between a member ceasing to build up any more rights in the scheme and their scheme retirement age – to 2.5% per annum.
The introduction of a ‘statutory override’ would make it easier for scheme rules to be amended to comply with measures in the Pensions Act 2004 which reduced the cap for annual increases to pensions derived from benefits accrued since 2005 from 5% to 2.5%.
O’Brien said: “We believe the proposals strike the right balance between encouraging employer provision of pensions and protecting members’ benefits. These measures will reduce costs and make it easier for schemes’ rules to take advantage of specific relaxations to legislation.
“We have also identified further areas where regulation now needs to be carefully examined and we intend to take this forward as part of an ongoing programme of deregulation,” he added.
A short period of consultation will now follow before any of the changes are introduced.
Additional areas for further consultation include:
The circumstances in which an employer leaving a multi-employer scheme must make a payment to the scheme under the Employer Debt Regulations.
Principles-based legislation, starting with simpler rules on what schemes must tell members.
Employer concerns about the existing rules on surplus funds in defined benefit schemes.
