Scheme Modification

Key Points

  • Amendment or modification powers generally are found in scheme rules not in pensions legislation
  • Pensions legislation restricts the way a scheme's modification power can be used
  • Pensions Act 1995: Section 67 onwards protects accrued rights to pension benefits
  • Section 67 also restricts the way changes can be made from defined benefit or final salary benefits to defined contribution or money purchase benefits
  • Section 67 also restricts the way changes can be made which might reduce the rate of a pension
  • Trust law requires trustees to act in members' interests and this applies to decisions to agree to scheme modifications
  • Section 68 Pensions Act 1995 provides a statutory power to make specific modifications regardless of the powers contained in the scheme rules
  • Additional considerations arise where the scheme is contracted out, section 37 of the Pension Schemes Act 1993 imposing additional formalities in such cases
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