We thought we'd take a look at some pensions deadlines coming up soon.

At a glance.

The 2009/10 Pension Protection Fund (PPF) Levy

The, now familiar, deadlines for submitting key information relating to the PPF levy will soon be coming up. The PPF recently issued an updated version of its online Exchange service so that schemes can now submit online all voluntary certificates for contingent assets, deficit reduction contributions and block transfers. The PPF has issued guidance on this.

As a reminder, the deadlines are:

  • certification/re-certification of contingent assets: 5pm on 31 March 2009;
  • certification of deficit reduction contributions: 5pm on 7 April 2009;
  • notification of material block transfers taking place up to 31 March 2009: 5pm on 7 April 2009; and
  • certification of those material block transfers: 5pm on 30 June 2009.

The PPF's policy in relation to block transfers has changed for the 2009/10 levy. Details about the changes are on the PPF's block transfers page. Full block transfers will be taken into account for the 2009/10 levy. However, partial transfers will impact on the 2010/11 levy, if they are reported by 30 June 2009.

Pressures on the economy could well mean that the PPF will be taking on more schemes than it had previously predicted. If that proves to be the case then the levy is likely to increase so it's all the more important for schemes to take whatever steps they can to reduce their levy burden. For instance, making sure that your Dun and Bradstreet failure score is based on accurate information and running your business in a way designed to improve your score as much as possible should, in turn, help you to control your levy.

Deadline on the horizon for enhanced and primary protection registration

April 2006 saw a wide-ranging overhaul of the tax regime for pensions. As is often the case when major changes are introduced, a whole raft of transitional provisions were also brought in to address the main instances in which significant losses would otherwise be borne by members and their survivors.

The two main forms of protection offered were enhanced protection and primary protection. Registering for enhanced and/or primary protection must be done before 6 April 2009, so members looking to take advantage of this should already be putting their pension affairs in order. They will need to gather information about their benefits as at 5 April 2006 and complete a form issued by HMRC (APSS 200). Obtaining the information and checking the figures can all take time, especially as the deadline approaches and schemes begin to deal with a greater number of requests.

Members can register for both primary and enhanced protection. This is because enhanced protection can be lost in a range of circumstances (for example, where a transfer takes place without meeting extra requirements set out in the legislation). Registering for both forms of protection is, therefore, a belt-and-braces way of dealing with this possibility (the enhanced protection takes precedence and if that protection is lost then primary protection applies instead). Members wishing to register for both forms of protection will need to gather more information about their pension rights than if they were pursuing just one form of protection.

Trustees should make sure that their administration teams have in place whatever systems are needed to enable them to deal as efficiently as possible with requests coming their way between now and next April.

The primary protection route looks at the percentage by which the member's benefits exceeded the lifetime allowance (LTA) immediately before 6 April 2006 and gives him/her a LTA reflecting that. So, for instance, if the member's benefits on 5 April 2006 amounted to 125% of the LTA for 2006/2007, then that member's LTA will be 125% of whatever the LTA happens to be at the time of a future crystallisation event.

If the member chooses the enhanced protection route, s/he will not be required to measure benefits against the LTA, but in return for this must not accrue any further benefits after 6 April 2006.

Special rules apply regarding the protection of lump sums (the rules differ depending on whether the lump sums are payable on death or in connection with retirement).

Revaluation cap drop on the horizon

We recently issued an alert at the end of last year on the imminent change to the cap that applies to the revaluation of deferred pensions.

The revaluation cap will be reduced from 5% to 2.5% for rights earned from 6 April 2009. Reducing the revaluation cap will bring it into line with the 2.5% cap for the indexation of pensions in payment, which has been available for accrual since 6 April 2005.

Trustees and employers will need to discuss whether their scheme should take advantage of the reduced cap. Having made that decision, they will need to look at the scheme rules to work out whether any changes will be needed. For example, it may be that the rules refer to the cap set by legislation from time to time, in which case taking no action would mean that the reduced cap would apply automatically. Equally, it may be that the rules refer expressly to a 5% cap, so in that scenario an amendment would be needed if the scheme wanted to adopt the reduced cap.

The Government wants schemes to feel that they can take advantage of the reduced cap for revaluation, as well as the cap that applies to the indexation of pensions in payment. To address any restrictions in scheme rules that would prevent schemes from doing this, there are to be regulations which will allow schemes to proceed as if the restrictions in the rules were not there. These "statutory overrides" would be available for rights earned on or after 6 April 2009.

As well as assessing the position under the scheme rules, schemes will also need to make sure that their administration teams are made aware of any changes.

Just before Christmas, the Pensions Regulator published a reminder to employers of their duty to consult affected members before making certain kinds of future service changes listed in the legislation. We do not think that a change reducing the revaluation cap for a scheme would fall into one of the categories of listed changes that would trigger that duty to consult. However, some employers may feel that it would be appropriate to initiate some form of consultation with their membership.