The Department for Work and Pensions has issued a response to the consultation it carried out following publication of its preliminary recommendations following the deregulatory review of private pensions.
Key points include:
Revaluation of deferred pensions
The government intends to proceed with its proposal to reduce the cap on revaluation of deferred pensions from 5% to 2.5% and has included the relevant provision into the Pensions Bill. This proposal will only affect future accruals that occur after the relevant provision of the Pensions Bill is brought into force.
The government has decided to introduce statutory overrides to allow schemes rules to be amended to take advantage of the measures, introduced under the Pensions Act 2004, which allow the cap on the indexation of in payments to be reduced from 5% to 2.5%. This power will only be exercisable if both trustee and employer agree.
The government commented that this change should still help schemes whose rules do not allow the employer to enter negotiations with trustees for changes to future rights.
The government intends to bring in this change through future regulations.
Although this was not part of the DWP’s formal consultation, many respondents raised difficulties with triggering the employer debt. In particular they raised concerned that the employer debt was triggered in circumstances that do not reflect the policy intentions of the government.
The government has signalled its intention to carry out further work with the pensions industry to address some of the industry’s concerns. This work is expected to begin in the new year and will be separate from the current draft regulations that amend the employer debt regulations.