From 6 April 2006 (A Day) pension schemes were allowed 5 years to update their Scheme Rules to incorporate the new tax regime. Whilst most trustees took advice and action in 2006 and incorporated the new tax regime in their Rules, there are some schemes which did not.
If Trustees do not address this issue now and certainly before 5 April 2011, there could be unintended consequences of not taking action. The Scheme could, after 5 April 2011, end up providing higher benefits than intended as any Earnings Cap in place which currently restricts scheme benefits will fall away. There may also be provisions in the Scheme Rules which will affect the Scheme’s approved status post 5 April 2011.
One of the Pensions Regulator’s key indicators of good governance is a requirement for Trustees to review and update their Scheme Rules on a regular basis.
Time is now of the essence since there is less than 6 months to review the Scheme Rules, before it is too late!
Trustees will also need to consider preserving the power to pay any scheme surplus to the employer (Section 251 of the Pensions Act 2004). This was, until very recently, required to be addressed by 6 April 2011 at the latest but a last minute amendment to the requirement has meant that the deadline date has now put back to 6 April 2016. Not the same rush required but still needs to be dealt with.