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DWP backtracks on pensions legislation

Pensions minister Steve Webb has confirmed the Government will amend legislation which threatened to prevent payments from a pension scheme to a sponsor employer.

Lawyers had previously warned that Section 251 of the Pensions Act 2004, headed “Payments of surplus to employers: transitional power to amend schemes”, would prevent such transfers from April 6, next year.

The industry has lobbied Government heavily on the issue, arguing that the legislation had unintended consequences and would force employers to contact scheme members to make them aware of the upcoming deadline or risk losing the right to repay any future surplus.

A department for work and pensions spokesman confirmed it was “not the Government’s intention” that the ruling would apply in these circumstances.

The DWP says schemes that are winding up, money purchase schemes, or schemes which make payments that are specifically exempted from Section 37 of the Pensions Act 1995, such as routine administrative payments, will be exempt from the original legislation.

In a statement issued today, Steve Webb says: “We’ve listened to the concerns of pensions trustees and stakeholders about Section 251 and I can confirm that we will make amendments as soon as we can. We want to ensure that the provision operates in a sensible way.”

The trustees of schemes which remain affected by the legislation will have an extra five years to act on the legislation, the DWP confirms.

Linklaters partner Tim Cox says: “Because of this act a lot of employers had management problems on a day to day basis, because they were going to have to go through this farcical process of informing each of their members about what would happen in the event of a surplus.”

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