Pursuant to Section 33 of the Pensions Act, the Minister for Social Protection recently signed the Occupational Pension Schemes (Revaluation) Regulations 2016 for the year ending 31 December 2015. As a result of a decrease in the Irish Consumer Price Index last year the Minister prescribed for the first time a reduction of 0.3% in the value of preserved benefits. Generally speaking, statutory revaluation occurs automatically, but depending on the wording of a defined benefit scheme’s revaluation rules, it may now be difficult to determine whether a reduction should be applied to deferred benefits. For example, the reduction may not apply where a set of scheme rules provides for deferred members to receive benefits on a higher scale in place of a preserved benefit.
Comment has in particular focused on the use of words such as “increase” in the revaluation provisions of scheme rules, even where this is specifically linked to Section 33 of the Pensions Act. Most revaluation rules were drafted before the possibility of a downward adjustment was envisaged, either in the underlying rate of CPI or in the legislation governing statutory revaluation, which was amended in 2012 to allow for downward adjustment.
In light of this recent development, we recommend that both employers and trustees examine the revaluation language contained in their respective scheme’s governing documentation and consult accordingly with their legal and actuarial advisers.