Pensions update – Statutory overrides warnings

Employers and trustees can still take some last minute action to prepare for A-day (April 6) by checking whether or not they need to change scheme rules in order to comply with the new pensions simplification legislation and taxation limits.

Schemes can rely on statutory overrides, which effectively keep in place the old rules until 2011. But Jane Beverley, senior technical consultant at Punter Southall said: "These overrides are quite complicated and it’s always worth running them past a lawyer and checking that you don’t need to make any changes before A-day."

However, she added that most employees and trustees will not want to wait until "the last minute" in 2011 and will take steps to change the rules in order to ensure compliance with the new regime.

Employers and trustees will also need to check that the deeds of administration are up to date and make provision for the new procedure and reporting requirements.

Furthermore, employers need to ensure that any high earners who are going to take enhanced protection in order to protect their benefits realise that they can’t make any further contributions post A-day.

After A-day, employers and trustees will also want to consider what opportunities they may want to give employees as a consequence of pensions simplification, said Beverley. For instance, they can change the rules to allow employees to increase contributions up to 100% of earnings or introduce flexible retirement.