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Out-Law News 2 min. read

Government promises occupational pension scheme regulations 'bonfire'


The Government is planning a dramatic overhaul of workplace pension schemes and will consult on whether to scrap many of the existing rules in the spring, according to press reports.

In comments reported by the Guardian newspaper, pensions minister Steve Webb said that the Department for Work and Pensions (DWP) planned to consult on a "bonfire" of existing regulations, which would cover every existing regulation "from the absolutely trivial to the huge".

"Every piece of regulation will go unless we can justify its existence," he said.

The Government was already looking at some areas of existing regulation it considered "seriously flawed", including the rules surrounding enhanced transfer values (ETVs), he said. ETVs are cash incentives paid to pension scheme members to transfer their accrued rights to another scheme. However, they reportedly face the disapproval of the Pensions Regulator, which has issued guidance on the practice.

The Department for Work and Pensions (DWP) is currently consulting on making it easier for people with small pension funds in more than one scheme to consolidate their pension savings, as well as allowing individuals aged over 60 to cash in small value pension pots worth up to £2,000, even if they have large pension savings elsewhere. It also hopes to reduce the administrative levies that eligible pension schemes are charged by the Government.

A spokeswoman for the Department for Work and Pensions (DWP) told Out-Law.com that Webb's comments, made at an event hosted by financial news service Headline Money, related to the Government's Red Tape challenge initiative.

"The Government wants to get rid of any unnecessary regulation, including unnecessary pension regulation," she said.

Pension law expert Carolyn Saunders of Pinsent Masons, the law firm behind Out-Law.com, said that simplifying existing regulation was a "big step" that would encourage employers to reengage in the provision of occupational pension schemes. However, she warned that many of the existing regulations were necessary.

"We must be careful not to throw the baby out with the bathwater because many regulations provide valuable protections for scheme members. The aim should be to identify the rules and regulations which are unnecessarily burdensome and which can be removed without prejudicing members and without causing additional short-term costs for schemes," she said.

"However, the idea of a 'bonfire' of the regulations will appeal to the many employers and trustees who struggle to cope with the work and costs caused by the proliferation of pensions legislation. That the Government recognises the importance of simplification in this area and seems prepared to do something about it is a big step towards encouraging employers to reengage in the provision of pensions."

The Government is currently allowing the public to scrutinise over 21,000 active regulations in what it is calling the Red Tape Challenge. It began in April last year and is considering different area of the law in stages, with a current focus on company and commercial law. Once each area of the law has been considered ministers will be encouraged to look at which regulations should be kept and why, with the default presumption being that burdensome regulation will go.

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