Following its consultation in January 2013, the Government has confirmed in its response to the consultation that the statutory override in the Pensions Bill that allows employers to reduce members’ benefits and increase member contributions to mitigate the loss of NI rebates when defined benefit contracting-out ends in 2016 as a result of the reforms to the State Pension will not be available in relation to people with ‘protected person’ status. 'Protected persons' are employees of certain previously nationalised industries, such as electricity and rail, who are entitled to accrue pensions benefits on the same basis as those they enjoyed before privatisation.

Comment

The effect of not allowing the statutory override to be used for protected persons effectively means that where employers use it to reduce ordinary members' benefits or increase their contributions, this could create further discrepancies between the treatment of ordinary members and those with protected person status. On the other hand if employers do not use the statutory override to amend ordinary members' benefits, they could see a significant increase in their costs when contracting out ends.