The Government has announced that it intends to bring into force Section 36 Pensions Act 2014 from October 2015. This will mean that money purchase benefits will vest immediately after the member completes 30 days' qualifying service. The effect of this is that, in such cases, the ability to make a short service refund to members with money purchase benefits who give up their membership within two years, but after 30 days, will no longer be available. The change will only apply in respect of money purchase benefits accrued after Section 36 is brought into force.
The change is driven by the Government's concern that members who are automatically enrolled into occupational schemes could otherwise be "cashed out" of schemes rather than contributions remaining in the scheme. The change will bring occupational schemes into line with contract based arrangements, where there is a analogous 30 days "cooling off" period for money purchase benefits. Occupational schemes will still be able to make short service refunds to money purchase members who leave within the first 30 days if they wish to do so.
Schemes will need review their Trust Deed and Rules and other scheme documentation in advance of Section 36 coming into force to check whether any changes are required.
The DWP's press release can be viewed by clicking here.