On the go: The Department for Work and Pensions will be lowering the guaranteed minimum pension fixed rate revaluation for early leavers by 0.25 percentage points, after its consultation into the matter attracted just two responses.
In a consultation published in September, the DWP said the new rate of 3.25 per cent takes into account the recommendations from the Government Actuary’s Department, which proposed a rate that ranged between 3 per cent and 3.5 per cent a year.
The revaluation rate is used by schemes that have chosen a fixed rate method to calculate the value of GMPs for early leavers — members who leave schemes before they reach their pensionable age.
This percentage is provided for in legislation, and it is reviewed every five years by the DWP. A new rate needs to be applied for those who leave pensionable service on or after April 6 2022, the consultation stated.
The recommendation from the GAD is based on a short to medium-term view on earnings assumptions being applied, and considers that most individuals leaving pensionable service between April 6 2022 and April 5 2027 (when the next review takes place) will be less than 10 years from the age at which GMPs are payable, it added.
The government consultation, however, only received two responses — one from the Pensions Administration Standards Association and the other from an individual.
“We are assuming that the low level of interest in this consultation is indicative of a general agreement that the proposed new rate of revaluation for the fixed rate revaluation for GMPs is appropriate,” the DWP stated in its response.
It also acknowledged that 50 per cent of its respondents felt that the proposed rate was too high, with that respondent arguing that “a lower rate of fixed rate revaluation would be in the interests of members of money purchase schemes with GMPs that are subject to fixed rate revaluation”.
Answering this point, the government said it had not previously been aware of this concern as no stakeholder had brought it up. It added that it saw no evidence to substantiate it.
The other respondent “had no views” about the proposed rate, and merely wished to see any change communicated to schemes and administrators “well in advance” of April 6 2022.
Assuming that the “very small number of responses” suggests that the industry is “largely content” with the proposed rate, the government confirmed it will lay regulations before parliament to effectuate it, the new rate applying to those who reach pensionable age on or after April 6 2022.
