Company pension schemes
Plans unveiled to reduce some of the protection against inflation
The Government has unveiled plans to reduce some of the protection against inflation incorporated in company pension schemes. If the new rules come into effect, the revaluation of deferred pensions will be capped at 2.5 per cent. Currently, pension schemes are obliged to revalue deferred pensions by up to 5 per cent.
The proposal, which aims to make it cheaper for employers to run schemes, is part of a rolling Government programme of deregulation. “These measures will reduce costs and will make it easier for schemes’ rules to take advantage of specific relaxations to legislation” said Mike O’Brien, Minister for Pensions Reform.
The plans were welcomed by the National Association of Pension Funds (NAPF). “These proposals will help sustain the future of defined benefit pensions, which provide valuable income to millions of working people in retirement,” said the NAPF’s Joanne Segars.
However, the Trades Union Congress (TUC) has criticised plans to reduce the cap on the revaluation. “This is particularly important for those with broken careers, typically women and carers,” said Brendan Barber, TUC general secretary.
”If we were to return to higher rates of inflation in the future this could quickly eat away at benefits built up early in a working life - something that seems to go against the Government’s message that we should all start saving as early as possible.”
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 | This article is for your general information and use only and are not intended to address your particular requirements. The articles are based on our understanding as at the 7th November 2008. They should not be relied up on in their entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. Articles that make reference to the Pre-Budget Report are subject to the Finance Bill becoming law. |