Pensions - Articles - Gowling WLG comment on the PLSA pension recommendations

 It would be good so see more focus on simplifying the regulatory morass which surrounds increases to work place pensions. This issue threatens to create substantial unexpected costs for some employers with legacy DB schemes.

 For example, on close inspection in the run up to a pensioner buy-in, it is quite common to find that admin systems are out of kilter with a scheme’s provisions (or with the relevant statutory overlay) when it comes to pension increases.

 These are some of the problems which crop up (sometimes despite not having been identified in audits for years):

 Getting the approach to late retirement factors wrong, especially if there is a Barber window to think through or a failure to distinguish between retirements from deferment and retirements from active service;

 Mistakes relating to GMP step ups;

 Uncertainty about the level of increases that should be applied to GMPs;

 Lack of attention to different generations of rules. Normally members who left before the latest consolidation have their benefits governed by earlier deeds (which might have different increase provisions), but admin manuals are commonly based on the latest rules only.

 What would really help pension schemes is some legislative intervention to address some of those issues – especially where the problem is a product of the preservation legislation.