The following Pensions practice note provides comprehensive and up to date legal information covering:
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.
Occupational pension schemes must revalue a member's benefits (excluding GMPs) where:
the member's pensionable service ends on
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