Old Revenue limits
Schemes which were in existence before A-Day, 6 April 2006, and which became registered pension schemes on A-Day have until 5 April next year to modify their scheme rules to adopt whichever of the pre-A-Day Revenue limits they wish to retain. If this is not done, all the “old” Revenue limits will be removed from scheme rules by operation of law. This potentially affects not only ongoing schemes but also schemes which were already in wind-up before A-Day and life cover only schemes.
This could have serious financial consequences for schemes and employers. For example, if pensionable salary is subject to the earnings cap, that cap will no longer apply from 6 April 2011 unless the necessary rule amendment has been made. Therefore any scheme members earning more than the earnings cap will be entitled to greater benefits because these will be based on a larger pensionable salary.
Surplus: repayment to employer
Similarly, trustees of schemes in existence 6 April 2006 have until 5 April 2011 to pass a resolution under section 251 Pensions Act 2004 to enable payments of surplus to be made to the employer. This resolution is subject to prescribed requirements as to content and procedure and is necessary even if the scheme rules already include such a power. If the resolution is not passed before the deadline, the scheme will never in future be allowed to make such a payment. This does not mean any surplus will automatically be paid to the employer: the trustees must always be satisfied that a payment to the employer is in the interests of the scheme members.
It is very important to check:
- whether your scheme rules have been definitively amended to retain any desired “old” Revenue limits; and
- whether a trustee resolution has been passed to enable payments of surplus to be made from the scheme to the employer.