The government has proposed to cut the cap on the adjustment of deferred pension schemes for inflation from 5% to 2.5%.
Its response to the findings of the Deregulatory Review, an independent review of pensions regulation, which is designed to ease the burden of regulations on employers that provide pension schemes, has been announced by Mike O’Brien, minister for Pensions Reform. The proposals would reduce the cap on the revaluation of deferred pensions so that the maximum increase in the value of pension rights for a scheme member between them ceasing to build up any more rights in the scheme and their scheme retirement age would be 2.5% per annum, where the cap has previously been 5%.
A ‘statutory override’ was also suggested which would make it easier for employers to amend schemes to reflect a change to the cap used for the revaluation of deferred pensions.
“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,” said O’Brien.
The aim of the Deregulatory Review is to make the private pensions regulatory framework simpler, by recommending changes that will make running schemes easier, lighten regulation and reduce bureaucracy and cost.