On 5 December the DWP published its response to its consultation on the Deregulatory Review Report prepared by Chris Lewin and Ed Sweeney. It confirmed that:
- It will proceed with its proposal to reduce the cap on the revaluation of deferred pensions from 5% to 2.5%. Employers will need to obtain the agreement of the scheme's trustees to make the change, which will only affect future service rights. The Pensions Bill contains provisions to give effect to this change.
- In relation to risk sharing schemes, the Government proposes to work with stakeholders to explore the implications of allowing increased flexibility in revaluation and indexations. However, it commented that it "remains to be convinced" about the case for conditional indexation.
- The Government rejected a proposal that a return of scheme funds to the employer should, with trustees' agreement, be available once the scheme specific funding target is reached. It also declined to remove the Pensions Act requirement that trustees must be satisfied that a return of surplus to the employer is in the interests of scheme members. It did, however, state that it plans to work with employers over the coming months with a view to addressing concerns in this area, with further Regulator guidance mooted as a possible way forward.
- The Government and HMRC continue to discuss ways to improve the trivial commutation regime. No conclusions or timetable for any possible changes are mentioned.
- In relation to section 75 debts (and in addition to the amending regulations which are due out "shortly" (see our briefing here)), the Government intends to work with the industry to solve further difficulties in this area. However, the Government is concerned that any changes should not create loopholes in the legislation or undermine the principle that employers should fully meet their pension obligations.