The Department for Work and Pensions (DWP) has issued its response to the consultation which followed publication of its response to the deregulatory review of private pensions in October 2007. The paper summarises the results of the consultation, and outlines the steps the DWP intends to take. The proposed reforms are not as wide-ranging as many had hoped.
Two of the recommendations have been included in the Pensions Bill (see above): reducing the cap on revaluation 2.5 per cent p.a. and abolishing safeguarded rights. Regulations are to introduce a statutory override to allow schemes to implement the reduction in the cap on limited price indexation of pensions in payment from 5 per cent to 2.5 per cent a year from 6 April 2005 (as allowed by the Pensions Act 2004), provided both trustees and the employer agree.
The other main issues are:
- Pension increases: it is confirmed that LPI on pensions in payment will remain.
- Surplus: the government will consider "trapped surplus" issues but will not remove the requirement in the Pensions Act 1995 that trustees must be satisfied that a return of surplus is in the members' interests.
- Employer debt requirements: the final regulations amending the statutory employer debt requirements are expected to be available early in the New Year. The DWP intends to revisit the issue with the aim of simplifying the regime.
- Trivial commutation: HMRC is considering whether the requirement in the Finance Act 2004 that members' entitlements under different schemes must be aggregated for the purposes of trivial commutation should be amended.
- Trustee knowledge and understanding: the requirements will continue to apply to each individual trustee and not to the trustee board as a whole; but the government will consider with the Pensions Regulator whether some requirements need clarification.
- Risk-sharing schemes: the government will work with the Pensions Regulator and the PPF on the regulation and treatment of risk-sharing schemes but the time is not yet right for legislation.
- Principles-based legislation: a DWP working group will set broad parameters for principles-based regulation of private pensions, focusing initially on the disclosure requirements and reporting to ministers by summer 2008. After consultation, implementing legislation is intended to be in place by April 2010.