Following a period of consultation, the Government has published regulations in relation to bridging pensions which will come into force on 1 October 2013.
A number of pension schemes contain provisions dealing with bridging pensions, where a greater pension is paid from the scheme until the member reaches state pension age. As the state pension age is due to be increased over time the original provisions may no longer be appropriate.
The specific wording of scheme trust deeds and rules should be checked to assess the terms for bridging pensions. For some schemes, payment of a bridging pension may make reference to the date of commencement of state pension (as opposed to age 65) and therefore bridging pensions will automatically extend to members’ increased SPAs as they change over time. Other schemes may contain provision where bridging pensions cease in line with the current state pension ages.
Amendments of the scheme rules to restrict the bridging pensions could not be done using the Scheme’s own amendment power as there is a risk that this would be in breach of statutory restrictions on amendments.
October 2013 will see the introduction of a special statutory power for trustees to amend their scheme rules by resolution (with the consent of the employers) to allow bridging pensions to stop at age 60 or 65 or between 60 and the state pension age (at the relevant time). This power is based on the specific terms of the scheme rules in 2010. In addition, the reduction applying can be greater or smaller than the existing position.
This power of amendment has been finalised with some limitations, including that it can only be used to change benefits for those who have yet to retire i.e. it cannot be used to affect pensions already in payment. In addition, trustees may only use the power if it is a reasonable consequence of the change in SPA.
Trustees and employers will want to make an assessment of their rules within the next few months to allow any changes to be timetabled into the scheme calendar.
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