The Department of Work and Pensions (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."
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The Government proposes the a reduction of 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 five per cent per annum.
Also proposed has been the 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 five 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 including the circumstances in which an employer leaving a multi-employer scheme must make a payment to the scheme under the Employer Debt Regulations and principles-based legislation, starting with simpler rules on what schemes must tell members.
(GK/SP)
