 |
|
|
|
Revaluation of deferred benefits
by Ian Neale 11/12/2009
Printer-friendly version of this page
The Occupational Pensions (Revaluation) Order 2009 (SI 2009/3267) was laid before Parliament yesterday and comes into force on 1 January 2010. The Order specifies the percentage by which deferred benefits coming into payment (at NPA) under a final salary scheme during the calendar year 2010 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 |
Higher
Revaluation
Percentage |
Lower
Revaluation
Percentage |
0 |
0.0% |
0.0% |
1 |
0.0% |
0.0% |
2 |
3.5% |
- |
3 |
7.6% |
- |
4 |
11.4% |
- |
5 |
14.4% |
- |
6 |
18.0% |
- |
7 |
21.3% |
- |
8 |
23.4% |
- |
9 |
25.5% |
- |
10 |
29.6% |
- |
11 |
31.0% |
- |
12 |
35.2% |
- |
13 |
40.1% |
- |
14 |
43.0% |
- |
15 |
48.6% |
- |
16 |
51.9% |
- |
17 |
54.6% |
- |
18 |
60.2% |
- |
19 |
66.7% |
- |
20 |
84.9% |
- |
21 |
99.0% |
- |
22 |
110.3% |
- |
23 |
119.1% |
- |
24 |
125.9% |
- |
There are two new features in this year's Order. The "higher revaluation percentage" 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 the minimum increase which must be applied for a preserved pension based on pensionable service carried out before 6 April 2009. The Pensions Act 2008 reduced the 5% 'cap' to 2.5% compound per annum for pension based on service from 6 April 2009, though schemes may continue to use the higher cap under scheme rules. Thus there has appeared for the first time a second column of figures (the "lower revaluation percentage") in this year's Order. This represents the lower of the rise in prices or 2.5% pa compound over the period.
The second new feature results from the fact that the September 2009 annual RPI figure was negative. As the governing legislation in para 2 Sch 3 PSA 93 refers to "the percentage increase" (rather than for example "the percentage change"), however, no revaluation percentage may be less than zero, even if the RPI is negative. Hence the one-year percentage in both columns is 0.0%.
DWP has issued a helpful Explanatory Memorandum to accompany this year's Order.
Note that 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.
|
|
|
