Section 21 removes the requirement for cash balance benefits to be indexed under Article 51 of the 1995 Order. Cash balance benefits are benefits which the member accrues in the form of a lump sum or fund, the level of which can be determined in advance, is guaranteed to reach a particular minimum, or is determined by the application of a notional accrual rate or rate of interest. The fund is then used to buy an annuity or to provide a pension from scheme funds.
Current legislation requires that members with cash balance benefits buying or receiving an annuity or being paid a scheme pension must receive Limited Price Indexation. This means that accruals between 1997 and 2005 must be indexed to at least the lower of the RPI or five per cent and accruals post 2005 must be indexed at the lower of the RPI or 2.5 per cent.
Pensions or annuities already in payment prior to this section coming into force will continue to be indexed and will not be affected by the changes.