It has been recently announced that in addition to the revised Funding Standard, the Government is to make a number of other changes with respect to defined benefit schemes.  These changes are follows:

• The rules relating to revaluation of preserved benefits will change to ensure greater equity in the accrual of pension rights as between deferred and active members.  This is likely to mean that if pensionable salaries have been frozen for active members, deferred members will not be entitled to revaluation of their benefits in line with inflation 
• The priority order for benefit payments when a scheme winds up in deficit will be changed.  Currently, all pensioner benefits take priority over benefits for active and deferred members.  However it has now been announced that a threshold will be introduced above which pensioners’ benefits will not be prioritised, so as to allow a more equitable distribution of the available assets amongst all membership categories.  At present it is thought that legislation will continue to prioritise existing pensioners and ensure that they receive their benefits, but only up to a level of €30,000 or 75% of expected benefits, whichever is lower.  Assets in the scheme would then be distributed among active members and deferred members to the same limits and pensioners would then get priority in the distribution of the remaining assets
• The Pensions Board will be given powers to wind up schemes in certain limited circumstances, such as where a scheme is underfunded and the trustees and employer are not in a position to adopt a funding proposal and where it is clear that the position will continue to deteriorate.  Up to now, while the Pensions Board has had the power to intervene to reduce benefits in a scheme, it has not been able to intervene to wind up a scheme. 

Legislation to provide for these changes is to be introduced in the coming months.  The Pensions Board has confirmed that it expects to issue guidelines for defined benefit schemes, taking account of the above changes, by the end of the year.

Contributed by Michael Wolfe.