The Department for Work and Pensions (DWP) has issued a consultation paper, draft statutory instrument and impact assessment on transitional changes in relation to the new definition of "money purchase benefits" in section 29(1) of the Pensions Act 2011.

The issue regarding the definition of "money purchase benefits" arose because of the Supreme Court ruling in Houldsworth and another v Bridge Trustees Ltd and another [2011] UKSC 42 (Bridge Trustees). The DWP did not agree with the way in which the statutory definition of "money purchase benefits" was construed in Bridge Trustees and therefore proposed legislation to clarify that the statutory definition of "money purchase benefits" should only apply to a situation where there was no risk of a funding deficit.

It is anticipated that the majority of schemes affected by this change will be hybrid schemes. The draft regulations make clear that schemes affected by this new definition of "money purchase benefits" will not have to revisit key decisions taken before 27 July 2011 (this is the date of Supreme Court ruling in Bridge Trustees and the date the DWP issued its announcement that it would amend the statutory definition of money purchase benefits). Therefore, for example, pension schemes will not have to revisit employer debt events occurring on or before 27 July 2011. The consultation closes on 12 December 2013. Please click here to access all the consultation documentation.