From 1 October 2013 trustees will have a free-standing, statutory power (exercisable by resolution) to amend their DB scheme rules on bridging pensions in the light of rises in state pension age.

Bridging pensions are also known by other names e.g. state pension offsets. They act as a temporary substitute for the state pension when someone retires before SPA.

The power is independent of a scheme’s own alteration power and any restrictions on it. Nor do the usual statutory constraints on amending accrued rights apply.

The employer’s consent is required, but 60 day employer consultation is not.

Without this help, some schemes might have difficulty heading off the unforeseen extra cost of certain types of bridging pension as SPA increases.

Two options

Broadly, trustees can change the age at which a bridging pension ceases and the amount by which it is cut.

The two options depend on what a scheme’s rules said as at 5 May 2010. If they allowed or required a bridging pension to stop between age 60 and 65, this can be changed to reducing any time between 60 and SPA.

Where the rules said bridging would continue until SPA, the end date can be switched to an age between 60 and 65. But a pension already in payment cannot be reduced.

Under both options:

  • a pension can be reduced by the bridging element or a different amount and
  • the change has to be reasonable in the light of changes in SPA.

Meanwhile, the definition of an authorised "scheme pension" in the tax legislation has been amended to allow these more flexible forms of bridging.