Changes To Pension Revaluation Rates

The Pensions Act 2008 includes a provision to reduce the cap on the rate of statutory revaluation of deferred defined benefit pensions from 5% to 2.5% per annum.

The proposed change was intended to take effect from January 2009 but it has been announced that the intended implementation date has been postponed until 6 April 2009. When the legislation comes into effect, it will mean that deferred pensions in defined benefit schemes will be revalued until they come into payment according to the rate of inflation, but capped at 2.5% instead of the current cap of 5%. The new lower cap will only apply to benefits accrued after the date of implementation. Benefits already accrued will be unaffected by the change.