Sections 278 - 280 of the Pensions Act 2004 amend the limited price indexation (LPI) provisions of ss. 51 and 162 of the Pensions Act 1995 and s.40 of the WRAP Act 1999. As well as reducing the LPI burden for DB schemes in future, lowering the cap from 5% to 2.5%, the Government is to remove the LPI obligation altogether for money purchase benefits coming into payment from 6 April 2005.

However, the Act itself only covers rights accrued on or after 6 April 1997. To remove the pre-6.4.97 indexation requirement (RPI up to 3%), which applies to Protected Rights, requires amendments to existing Regulations. Today, the DWP issued a consultation on this: The Personal and Occupational Pension Schemes (Indexation and Disclosure of Information) (Amendment) Regulations 2005.

The draft Regulations aim to do four things:

1. remove the indexation requirement for pensions derived from protected rights accrued before 6th April 1997, via amendments to the The Personal and Occupational Pension Schemes (Protected Rights) Regulations 1996 (SI 1996/1537).

2. ensure rights transferred between schemes/pension arrangements reflect the policy on indexation, via amendments to the Occupational Pension Schemes (Indexation) Regulations 1996 (SI 1996/1679).

3. reflect the s280 Pensions Act changes to defined benefit indexation for Pension Credit Benefit, via amendments to the Pension Sharing (Pension Credit Benefit) Regulations 2000 (SI 2000/1054).

4. introduce an information requirement for occupational schemes. Removing the requirement to index pensions derived from money purchase benefits means that people affected will be able to choose between different types of annuities. The Government wants to ensure that schemes provide certain information to help individuals make this choice - perhaps by forwarding published guidance from the Pensions Regulator. Amendments to The Occupational Pension Schemes (Disclosure of Information) Regulations 1996 (SI 1996/1655) are proposed.