On 5 December 2007 the Department for Work and Pensions (DWP) published its response to the consultation on the deregulatory review (the Review). The consultation itself was published on 22 October 2007 in response to the Review provided by Chris Lewin and Ed Sweeney and sought views on:
- a reduction in the revaluation cap on deferred pensions from 5 per cent to 2.5 per cent for future accruals;
- the introduction of a statutory override to enable schemes to be amended to reflect the reduction of the limited price indexation (LPI) cap from 5 per cent to 2.5 per cent for pensions in payment and/or the proposed reduction in the revaluation cap; and
- the introduction of legislation governing certain types of risk-sharing pension schemes.
Having considered the representations received, the government has decided to do the following:
- It will proceed with the reduction of the LPI cap to 2.5 per cent and will include relevant provisions in the forthcoming Pensions Bill to give effect to this change.
- It will introduce a statutory override. This will permit scheme rules to be amended to reflect the 2004 change to the indexation cap for service going forward and for future change to the revaluation cap exercisable with the agreement of both trustees and employers. Appropriate regulations will be issued in due course.
- It will continue to work with the Pension Protection Fund (PPF) on their treatment of risk-sharing schemes and to liaise with the Pensions Regulator (TPR) to consider the scope for sharing information about existing risk-sharing schemes. However, no immediate legislation is contemplated.
The DWP in its response also set out the government’s position on other issues which were not part of the formal consultation but were raised by respondents, including: the limited price indexation of pensions in payment; accrued rights; scheme surpluses; pension sharing; trustee knowledge and understanding; trivial commutation; employer debt and principles-based legislation.
A more in-depth analysis of the DWP’s response is available in our January briefing which will be available soon. View the response (91KB) (.pdf)