Early leavers—revaluation
Early leavers—revaluation

The following Pensions guidance note provides comprehensive and up to date legal information covering:

  • Early leavers—revaluation
  • Statutory requirement to revalue benefits
  • When do the revaluation requirements apply?
  • Methods of revaluation
  • Revaluation using the final salary method
  • Statutory minimum level of revaluation
  • Annual revaluation orders
  • Change in basis of statutory revaluation from RPI to CPI
  • Revaluation periods and reference periods
  • The higher and lower revaluation percentages
  • more

Statutory requirement to revalue benefits

Statute requires pension schemes to revalue the deferred benefits of early leavers over the period of deferment by a minimum level when they draw their benefits. The aim is to provide some protection to members' deferred benefits from the impact of inflation over the period of deferment.

The statutory requirement to revalue the deferred benefits of early leavers is set out in sections 83–86 of and Schedule 3 to the Pension Schemes Act 1993 (PSA 1993) and is overriding, although most schemes have made amendments to their scheme rules to provide at least the minimum revaluation required by statute. However, as a result of a number of legislative changes made by the government to the statutory minimum and how it interacts with a scheme's provisions, care should be taken to read carefully what the scheme rules may say with regard to revaluation (for more on this, see below). Schemes may, if they wish, be more generous and revalue members' benefits by a higher percentage than required by statute.

For former defined benefit (DB) contracted-out schemes, there are separate statutory requirements for the revaluation of guaranteed minimum pensions (GMPs) under PSA 1993, s 16—see Statutory minimum revaluation for guaranteed minimum pensions below.

When do the revaluation requirements apply?

Occupational pension schemes must revalue a member's benefits

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