2003 Occupational Pensions Revaluation Order Laid
by Ian Neale 04/12/2003 Printer-friendly version of this page
The Occupational Pensions (Revaluation) Order 2003 (SI 2003/3002) was laid before Parliament on 28 November and comes into force on 1 January 2004. The Order specifies the percentage by which deferred benefits coming into payment (at NPA) under a final salary scheme during the calendar year 2004 must be revalued. This depends on how many completed periods of 365 days have elapsed since the individual left pensionable service. The figures are as follows:
Number of completed
365-day periods |
Revaluation
Percentage |
0 |
0.0% |
1 |
2.8% |
2 |
4.5% |
3 |
6.3% |
4 |
9.8% |
5 |
11.0% |
6 |
14.6% |
7 |
18.7% |
8 |
21.2% |
9 |
25.9% |
10 |
28.7% |
11 |
31.0% |
12 |
35.7% |
13 |
41.3% |
14 |
56.7% |
15 |
68.6% |
16 |
78.2% |
17 |
85.7% |
18 |
91.5% |
The figure corresponds to either the rise in prices or 5% pa compound, whichever is the lower, over the whole of each period of deferment.
This is also known as 'limited price indexation' or LPI. Indeed, the Revaluation Order also determines the LPI rate to be applied (eg to pensions in payment based on post-5.4.97 pensionable service) for the following calendar year.
The Revaluation Order is also relevant where a pension debit has to be taken into account for correct calculation of Revenue Maximum Benefits or maximum contributions to a fully insured money purchase scheme or a SSAS, or for the headroom check on contributions to an AVC or FSAVC arrangement.
In the case of a contracted-out scheme, this revaluation does not apply to any GMP element of benefits accrued to 5.4.97. GMPs are separately revalued to State Pension Age, by either a fixed rate or in line with Section 148 (formerly s. 21) Orders. The latter are officially known as Revaluation of Earnings Factors Orders and should not be confused with Revaluation Orders as above.
Aries comment
This year the Revaluation Order once again has been laid late (although a week earlier than last year's). Software providers and scheme administrators are always under acute pressure when these figures come out, because they have to be used in all relevant benefit and contribution calculations from the following 1 January.
Could the Revaluation Order come out sooner?
It depends on the September RPI figure, which this year was published on 14 October (ie the second Tuesday, as normal). On 29 October the DWP sent a draft SI - for comment by 11 November - to the Joint Working Group, where it arrived almost a week later on 4 November. The final Order, as made on 23 November and laid five days later, is identical to the draft.
Since last year, in conjunction with the Society of Pension Consultants, Aries has been pressing the DWP to shorten this process. We think it is quite unnecessary that it should take 6 weeks. We ask why, for example, can't the DWP use email?
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