Pensions  

DWP paper seeks clarity on money purchase schemes

The 55-page consultation document, published on 31 October, put forward a range of detailed points on the definition of money purchase benefits under section 29 of the Pensions Act 2011.

The DWP said clarification was needed because the definition was a “fundamental building block” of pensions legislation but it had been thrown into doubt by the long-running Bridge Trustees versus Houldsworth case.

Bridge Trustees went to the supreme court to clarify whether the Imperial Home Decor pension scheme, which was under its stewardship and had begun winding up in 2003, was a money purchase scheme.

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In 2011 the supreme court ruled that it should be classified as money purchase scheme. The DWP lost a subsequent appeal against the judgement.

In a statement released at the time, the DWP said the judgement introduced “uncertainty” about how assets should be divided if such schemes were wound up, with many forced to take “expensive and time-consuming” legal recourse.

It added that the ruling would place some schemes outside the scope of a wide range of legislation, including governing scheme funding, employer debt, the Pension Protection Fund and the Financial Assistance Scheme.

The DWP’s proposals would retrospectively apply from 1 January 1997 and exempt pension schemes from revisiting decisions made between 6 April 1997 and 28 July 2011.

The regulations will also allow schemes to calculate cash balance transfer values based on the current value of the fund, subject to change if the scheme is underfunded.

The consultation will run until 12 December.