The Occupational Pensions (Revaluation) Order 2004 (SI 2004/2948) was laid before Parliament on 17 November and comes into force on 1 January 2005. The Order specifies the percentage by which deferred benefits coming into payment (at NPA) under a final salary scheme during the calendar year 2005 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 | 3.1% | 2 | 6.0% | 3 | 7.8% | 4 | 9.6% | 5 | 13.2% | 6 | 14.5% | 7 | 18.1% | 8 | 22.4% | 9 | 25.0% | 10 | 29.8% | 11 | 32.7% | 12 | 35.1% | 13 | 40.0% | 14 | 45.7% | 15 | 61.6% | 16 | 73.9% | 17 | 83.8% | 18 | 91.5% | 19 | 97.4% |
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 has been laid eleven days earlier than in 2003, the DWP apparently having decided to save time by dispensing with the previous practice of consulting on a draft Order. (The fact that Parliament was due to be prorogued the following day might also have had something to do with it.)
This will be welcomed by software providers and scheme administrators, who are always under pressure when these figures come out (they have to be used in all relevant benefit and contribution calculations from the following 1 January). The more timely publication of the Order follows pressure from Aries and the Society of Pension Consultants since 2002, when it did not appear until 5 December.