Money purchase benefits: new definition from July
By Ian Greenstreet
In July 2011, in response to the decision of the Supreme Court in Houldswoth v Bridge, the government announced that it would be tightening the definition of ‘money purchase benefits’ with retrospective effect from January 1997. The new definition, which is to come into force in July 2014 (the exact date is yet to be confirmed), provides that a benefit is only money purchase where ‘its rate or amount is calculated solely by reference to assets that must necessarily suffice’. In other words, the assets must always match the benefit.
Benefits previously considered to be money purchase but which, for example, have a guaranteed investment return or a defined-benefit underpin, and internal annuities, will no longer be considered to be money purchase benefits. Regulations are being introduced that mean that schemes that have been treating these benefits as money purchase, but from July will no longer be able to do so, do not have to revisit past decisions (other than in a couple of very limited circumstances). This means that important events, including wind-ups, section 75 debt calculations, transfer payments, actuarial valuations, benefit revaluations and pension sharing on divorce can generally stand…
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