On 23 May 2008 HMRC published a draft of The Registered Pension Schemes (Authorised Payments) Regulations 2008 (see Aries article), which included a proposal to allow occupational pension schemes to commute trivial pension benefits on a scheme-specific basis. Described as a de minimis rule, this would require all benefits under all related schemes (the term is undefined) to be commuted within a month, and the total of all payments not to exceed £2,000. Other conditions were laid out: there must not have been any recognised transfer out of any of the related schemes in the previous three years; controlling directors and connected persons cannot benefit; and the member must be aged between 60 and 75, as under the existing trivial commutation rules (FA 2004 Sch 29 para 7).

The whereabouts of these draft regs are presently unclear. An HMRC spokesperson informed Aries a month ago that "these are now in the final stages. We are hopeful that they will laid within the next 3 months, sooner if at all possible." On the other hand, Professional Pensions reported this week that the matter had been put on hold until the middle of 2009.

If the draft regs had been laid to come into force in October this year, as the industry had originally hoped, rather few scheme members would have been able to benefit from the new triviality rule - even where the scheme wished to adopt it. The reason is that existing contracting-out legislation precludes trivial commutation of contracted-out benefits on any basis other than Schedule 29.

With the publication of a new consultation document this week, evidence has emerged that the DWP has been thinking about this problem. The draft Occupational, Personal and Stakeholder Pensions (Miscellaneous Amendments) Regulations 2009 take the HMRC draft regs at face value and amend the relevant contracting out legislation (SI 1996/1172 Reg 20 on s.9(2B) rights & Reg 60 on GMP; SI 1996/1537 Reg 8 on Protected Rights) to permit commutation on the proposed scheme-specific basis.

This condoc contains another important innovation. An amendment to the Occupational Pension Schemes (Revaluation) Regulations 1991 (SI 1991/168) inserts a new reg 13A empowering trustees to modify scheme rules by resolution to reflect the lower statutory revaluation cap provided for in PA 2008 (s.101 and Sch 2). This amendment is one of the "statutory overrides" which the Government undertook to introduce following the Deregulatory Review (see Aries article). There is a similar provision in draft reg 9 in respect of the 2005 changes to indexation (LPI) provisions (SI 1996/1679, as amended by SI 2005/704).

The background to these proposed statutory overrides is the number of schemes where the statutory revaluation and indexation requirements are reflected in scheme rules. Some of these schemes have limited powers of amendment and it has not been possible to amend scheme rules to reflect the change to the statutory indexation cap. Such schemes would also be unlikely to be able to amend scheme rules to reflect the 2.5 percent revaluation cap introduced by PA 2008 (see Aries article).

These draft amendments use the power in PA 1995 s.68 to enable trustees to amend scheme rules by resolution. As drafted, the regs extend to all trust-based occupational pension schemes; the DWP is particularly asking whether there are any types of schemes where it would be inappropriate to allow trustees to have this power.

The draft regs also amend a number of other existing SIs, largely to

1. implement some minor policy changes;
2. make some outstanding consequential amendments; and
3. implement requirements in the Institutions for Occupational Retirement Provision (IORP) Directive relating to occupational pension schemes investments in the sponsoring employer.