RPSM09101570 - Technical Pages: Member benefits: A secured pension: Scheme pension: Stopping or reducing a scheme pension: Circumstances where a scheme pension is not deemed to have been reduced or stopped

Circumstances where a scheme pension is not deemed to have been reduced or stopped

Whilst the circumstances where a scheme pension can be reduced are restricted it is important to draw a distinction between

• cases that involve a deduction from the amount of pension payable to the member, which is not prevented by the scheme pension rules, and
• other cases in which there is a reduction of the amount payable to the member.

For example, some registered pension schemes have a provision allowing for the recovery by an employer of any money due to it through any criminal, fraudulent or negligent act or omission by the employee. This is referred to as an employer’s lien rule. Where the employer deducts debts due from the member from scheme pension payments then the rate of pension has not been changed. So compliance with an employers’ lien would not prevent the payments made in respect of the member continuing to meet the requirements of the scheme pension rules.

By contrast, a forfeiture order would effect a permanent reduction in the rate of pension payable and compliance with such an order would contravene the scheme pension rules, unless specifically exempted through legislation.

Correction of pension levels

When considering whether or not a scheme pension is being reduced, the comparison is by reference to the member’s legal entitlement. So if an administrative error occurs, with the result that a member is paid too high a pension, for example, because of a transposition error, paying £21,000 instead of £12,000 the subsequent correction of those payments is not a reduction in pension. That is because the individual was not legally entitled to the earlier higher rate.

The question of what benefits an individual is actually entitled to is an issue the scheme must deal with.