13/11/08 Revaluation of Deferred Benefits: Important Changes
13 November 2008
Important changes to the method of revaluing deferred final salary benefits are expected to be introduced at the end of January 2009.
The Pensions Bill 2008 will permit final salary schemes to reduce revaluation of deferred benefits from 5% per annum (or RPI if less) to 2.5% per annum (or RPI if less). The reduction can only apply to benefits accrued in respect of future service completed after the new provisions come into force.
The Bill is to be supplemented by regulations which are currently awaited, and which are also expected to come into force at the end of January 2009.
What should Trustees and Employers do now?
Trustees and employers should consider whether they want to adopt the new lower revaluation cap for benefits accrued after the legislation comes into force, or whether they wish to retain the current, more generous cap. They may wish to take advice on the funding impact from their scheme actuary.
How can Pitmans help?
To understand how the new legislation affects a scheme and the rate of revaluation required under it, it will be necessary to review the scheme rules as they may require amending to ensure your intentions are correctly followed. We would be pleased to carry out a review of your scheme rules and to prepare an amending deed if required.
For more information please contact any of our Pensions team or;