The National Association of Pension Funds (NAPF) has commented on the Government’s long-awaited regulations on the changed definition of money purchase benefits.
The NAPF welcomed the consultation on the Government’s plan to implement the new definition of money purchase benefits and the accompanying new draft regulations but is concerned that retrospective application of the law could involve hidden costs.
Penny Pilzer, NAPF DC Policy Consultant, said:
“The NAPF is pleased that the Government is consulting on the way in which it plans to implement the new definition of money purchase benefits. We understand the Government’s concern that as a matter of EU law, most benefits that include an underlying guarantee should be in some way incorporated into the funding regime and protected by the Pension Protection Fund. However, changes should be limited to those required to comply with EU legislation, and should be prospective and selective.”
The NAPF argues that the decision to impose a new definition of money purchase benefits back to 1997, when there are over 3,000 references to this phrase in legislation, is unnecessarily complex; and that the release of 55 pages of new regulations is disproportionate to the problem the Government is trying to correct. The Government has stated that the regulations will be drafted to ensure that, where treatment of benefits is likely to change, the new law applies only prospectively. However, the NAPF believes that it would be more proportionate to target those areas where a change is needed rather than risking the unforeseen consequences that will accompany a 16-year period of retrospectivity.
Ms Pilzer added:
“We think that there are important issues of employer and employee expectation that would be better handled as part of the Defined Ambition conversation. We are concerned that “DCPlus” arrangements, such as contributions with investment guarantees, could be subject to three different regimes within the space of a few years, which will discourage employers from adopting such plans in the future.”
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