DEPARTMENT FOR WORK
AND PENSIONS News Release (PENS-043) issued by The Government News
Network on 22 October 2007
Proposals for
easing the burden of regulations on employers providing pension
schemes were unveiled today by Minister for Pensions Reform Mike O'Brien.
The DWP has published its response to the findings of an
independent review of pensions regulation carried out by Ed
Sweeney and Chris Lewin.
Mike O'Brien said:
"We believe the proposals we've brought forward today
strike the right balance between encouraging employer provision of
pensions and protecting members' benefits.
"These measures will reduce costs and will make it easier
for schemes' rules to take advantage of specific relaxations
to legislation. We want to seek further views from stakeholders on
these plans before we introduce any changes, so there will be a
short period of consultation.
"We have also identified further areas where regulation now
needs to be carefully examined and we intend to take this forward
as part of an ongoing programme of deregulation."
The Government proposes the following measures:
* Reducing the cap on the revaluation of deferred pensions so
that the maximum increase required in the value of pension rights
- between a member ceasing to build up any more rights in the
scheme and their scheme retirement age - would be 2.5 per cent per
annum. The current cap is 5 per cent per annum.
* Introduction
of a 'statutory override' to make it easier for scheme
rules to be amended to take advantage of measures in the Pensions
Act 2004 which reduced the cap for annual increases to pensions
derived from benefits accrued since 2005 from 5 per cent to 2.5
per cent. A statutory override would also make it easier to make
amendments to reflect any change to the cap used for the
revaluation of deferred pensions.
A number of organisations asked the Government to remove the
statutory requirement to index pensions in payment but the
Government has rejected this move.
Mr O'Brien added:
"Removing the statutory requirement for employers to index
pensions would put the value of future payments at risk, and we do
not believe that would be in members' best interests. We also
agree with the reviewers' recommendation that no changes
should be made which would adversely affect pension rights already
accrued in schemes."
The Government accepts there is scope for more work on other
issues and as part of a rolling programme of deregulation will
explore the following areas:
* The circumstances in which an
employer leaving a multi-employer scheme must make a payment to
the scheme under the Employer Debt Regulations.
*
Principles-based legislation, starting with simpler rules on what
schemes must tell members.
* Employer concerns about the
existing rules on surplus funds in defined benefit schemes.
Notes to Editors
1. The full Government response to the Deregulatory Review's
findings is available at: http://www.dwp.gov.uk/pensionsreform/deregulatory_review.asp
2. There will be a further period of consultation on the
proposals ending on November 15. Anyone wanting to contribute to
the consultation should contact:
Ruth Saunders
Deregulatory Review, Department for Work and
Pensions
3rd Floor
Adelphi
1 - 11 John Adam
Street
London
WC2N 6HT
Email: adelphi.deregulatoryreview@dwp.gsi.gov.uk
Phone: 020 7712 2059
3. Legislation currently requires pension schemes to protect the
value of early leavers' deferred pensions against inflation
by increasing the amount of pension payable from normal pension
age in line with the retail price index (RPI) over the period of
deferment or by 5 per cent compound, whichever is less. This
requirement has been in place since 1986.
4. It is common for new mandatory legislation to override
existing pension scheme rules. Trustees then update their rules to
take into account new regulation at a convenient point.
Difficulties occur when regulations are relaxed and pension scheme
rules prevent trustees and/or employers from taking advantage of
the change. The reviewers specifically recommended allowing an
override to scheme rules which would enable scheme rules to be
amended to take advantage of changes made in the Pensions Act 2004.
5. The findings of the independent reviewers to the Deregulatory
Review were published on July 25, 2007 and are available at http://www.dwp.gov.uk/pensionsreform/deregulatory_review.asp
Textphone: 020 3267 5145
Website: http://www.dwp.gov.uk