DWP postpones start date for lower cap on revaluation requirements

The Pensions Act 2008 enacted a proposal of the government's deregulatory review that the required cap be reduced to 2.5pc per annum.

However it is understood the changes will be put back from January 1 next year to April 6.

Lane Clark & Peacock senior consultant Tony Bacon said: "This is a welcome announcement which will give schemes time to make the necessary changes.

"The previous target date of January 1 was just too close especially if employers needed to consult."

Despite this, Bacon said it was not widely appreciated that all pension schemes would need to do something as a result of the change depending on how their rules were written.

He said: "Amendments will be required either where the change is automatic but its introduction is not wanted or where it is not automatic and it is."

Bacon said all defined benefit schemes would need to carry out an immediate check on the impact of this new legislation - a move that would incur immediate legal, actuarial and administrative costs.

But he said the financial savings resulting from a move to the 2.5pc cap might be relatively modest and would only emerge over time.

He added: "Four months is not a long time to carry out the necessary actions whatever the decision on future revaluation and whatever scheme rules say. But this issue could be resolved quickly if trustees and employers work together on this now."

A DWP spokesman said: "Following discussions with pensions industry representatives, we intend to commence the relevant provisions of the Pensions Act 2008 with effect from April 6 next year. This should allow schemes sufficient time to make necessary preparations for the change, and has been welcomed by scheme advisers."