The DWP has issued a consultation (together with a 50 page set of draft regulations) on proposed changes to the statutory definition of “money purchase benefits”. The change to the definition is intended to have retrospective effect – so will be backdated to 1 January 1997. The consultation closed on 12 December 2013 and the regulations are set to come into force on 6 April 2014.
They are intended to impact on schemes with:
- cash balance benefits which have been treated to date as money purchase benefits (but have some kind of guarantee, eg a guaranteed interest rate or a guaranteed percentage of average salary)
- pensions within the scheme which are derived from money purchase benefits or cash balance benefits that have been treated to date as money purchase benefits.
Typically, the regulations (if passed) will impact a defined contribution scheme (or a scheme providing both defined benefit and defined contribution benefits) which permits members to purchase a pension from the scheme at retirement.
To view the consultation and draft regulations on the proposed change to the definition of money purchase benefits, click here