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23rd May 2019
:: Press Office | Press Releases | Government seeks to restrict pension increases for leavers

Press Release
Government seeks to restrict pension increases for leavers
One of the key elements of the Government’s response to the Deregulatory Review is a proposal to cap revaluation of preserved pension benefits, accrued after a certain date, to RPI up to 2.5% p.a. Benefits already accrued will be unaffected by these proposals.
Having conducted an initial impact assessment, the Government noted that ‘a reduction in the cap on revaluation would have very little effect on average private sector incomes from defined benefit schemes’. It argues that reducing the cap to 2.5%, from 5.0%, would encourage more employers to maintain defined benefit schemes where they may be considering other alternatives.
The Government’s response also adds that the potential reduction to benefits would not impact heavily on the State by way of pensioners having to fall back on other state benefits. A key factor is HM Treasury’s forecast for long term inflation of 2.9%.
Mike Jones of pension education website, says, “Since revaluation was introduced for the whole of non-GMP benefits accrued after 31st December 1990, 12 out of 16 years have seen RPI at higher than 2.5%. A preserved pension of £10,000 p.a. would have revalued to £15,501 p.a. If RPI had have been capped at 2.5% during the same period, the corresponding revalued pension would be £14,218 p.a. Is £1,300 p.a. negligible? – I don’t think so.”
In looking to save, if not revive, the defined benefit marketplace, the report acknowledges the complex and difficult issues in balancing employers needs against scheme members confidence in pensions.
Jones adds, “Many sponsoring employers feel battered and bruised by years of Government meddling in pension provision as it tried to protect members’ benefits. Setting a cap at 2.5% just because it fits in well with existing legislation for increases given to pensions in payment sits uneasy when the Treasury is forecasting higher long term inflation. As it stands, this is a retrograde step and scheme members need to be alerted so that they can at least voice their opinion in the consultation process.”
What remains unclear, is whether the change proposed to revaluation will affect public sector pensions?
Mike Jones Ltd
PO Box 240
Tel: 0845 123 5670
Mobile: 07730 855 596
Fax: 0871 433 4662 
Notes for editors: provides pension education, information and communication for scheme members, trustees, sponsoring employers and advisers. The website presents facts and information. does not give advice; does not sell pensions, life insurance products, investments or mortgages.
The Government wants to support and strengthen existing high quality occupational pension provision and it announced a rolling deregulatory review of private pensions legislation. The aim of the review is to make the private pensions regulatory framework simpler. It will seek to recommend changes for the future that will make running schemes easier, lighten regulation and reduce bureaucracy and cost. It will consider a range of measures affecting both administrative costs and the costs of provision. The review is examining the regulation of private pensions, drawing on proposals from stakeholders taking account of the balance between protecting members and encouraging employer provision of pensions and having regard to legal and other constraints.
Government seeks to restrict pension increases for leavers
Release date:
23rd October 2007

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