Pension Increases After April 2005: Take Two!
You may have heard the lines from the Bob Dylan song, Abandoned Love, that go; ďMy patron saint is fighting with a ghost.† Heís always off somewhere when I need him most.Ē† Well, I know how that feels I guess, as my usual good luck seems to have abandoned me just as I was writing a very tricky BeeLine a few weeks ago.† That BeeLine was entitled ĎPension Increases after April 2005í and our legal eagles have just told me that one of the assumptions I had made about the way Protected Rights funds were to be treated as far as compulsory escalation is concerned was wrong at the time.† So basically, this is me saying sorry and trying to explain what itís like to be merely human when I could really do with some kind of supernatural protection most of the time as I try to pick my way through this pension stuff.† You can click here if you want to refresh your memory on the†changes to escalation.† That will print out the BeeLine that Iím now adding to and amending.
In the previous BeeLine I said that, for money-purchase schemes and personal pension schemes, there would no longer be a requirement to purchase an increasing pension with the Protected Rights funds.† While this is true for Protected Rights funds built up since 5 April 1997, it is not true for Protected Rights funds built up before 6 April 1997.† What Iíd failed to spot was that while the requirement to escalate pensions derived from Protected Rights post 5 April 1997 is to be removed for money-purchase and personal pension schemes, there are separate requirements in relation to pre 6 April 1997 Protected Rights and these requirements havenít actually changed yet.
To be fair on me, though (and not to let the matter drop), the Statutory Instrument (SI) that will detail these changes has not been laid yet, and I had the disadvantage of only being able to work from Draft Regulations which, everyone agrees, seem to say what I said they said.† But they donít and Iím going to stop apologising now (because itís all beginning to sound a bit woosy to be honest) and just get on with itÖ..
The Department for Work and Pensions have clearly stated that they expect to lay the SI which will remove the indexation requirement for pre 6 April 1997 Protected Rights before 6 April 2005 so that it can come into force on that date.† My mistake was to have assumed that the regulations had already done that.† Sorry about that.† The end result, though, should be that the position I reported on in the previous BeeLine will soon be the correct one.† I mean, what a palaver!
Itís all part of the Governmentís drive to simplify pensions so Joe and Josephine Average can understand them I guess.† Me, Iíd prefer it if they could simplify things even more so that people like me could understand it too, but thatís just me being bitter and twisted again.† Itís something Iím just going to have to sort out with my patron saintÖ
15 March 2005
This document is based on Scottish Life's current understanding of the Pensions Act 2004. This may be affected by future changes in legislation and the individual circumstances of the investor. Independent advice must be sought regarding the effect on a specific scheme.