Commentary on Sections Part 3 – General Changes to Pensions Legislation about Pension Schemes Section 41: Collective benefits exempt from indexationSection 42: Regulatory own fund schemes exempt from indexationSection 43: Power to create other exemptions from indexation
124.The Pensions Act 1995 makes provision for the indexation of pensions under occupational pension schemes (other than public service pension schemes). Section 41 excludes collective benefits from the requirement to annually increase pensions in payment set out in section 51 of the 1995 Act.
125.Section 42 amends the provision in section 51 of the Pensions Act 1995 to ensure schemes set up as “Regulatory Own Funds” will be exempt from requirements to index benefits. This is as it may not always be appropriate for such schemes to index the benefits offered. Section 42(3) introduces a definition of a Regulatory Own Fund which refers directly to Article 17 of European Council Directive (2003/41/EC).
126.Section 43 amends section 51 of the Pensions Act 1995 to insert a regulation making power that may disapply the requirement to annually increase pensions in payment to a pension or part of a pension of a specified description. The power cannot be used to remove the requirement to index pensions that came into payment or parts of pension attributable to pensionable service that has occurred before the day on which regulations come into force, or to a pension or any part of a pension under a defined benefits scheme. The regulations will therefore not be able to affect rights already accrued or benefits under a defined benefits scheme.