DC short service refunds are being abolished from 1 October 2015 – have you taken all necessary action?
Published on 16th Sep 2015
At the moment a member of a defined contribution (DC) occupational pension scheme who leaves the scheme with less than 2 years’ pensionable service can receive a refund of contributions (a ‘short-service refund’). This option is being abolished on 1 October 2015. The abolition applies only to members whose qualifying service starts from 1 October 2015 (members who joined before that date may still be offered a short service refund). Therefore this will mainly affect DC occupational schemes that are open to new joiners.
Affected schemes need to review whether the right to take a refund on leaving with up to two years’ pensionable service is included within the scheme trust deed and rules. If this is the case it may be necessary to make an amendment to ensure members do not have a separate, non-statutory right to this.
Member communications should also be reviewed so that affected members are given the correct information on contribution refunds from joining.
This does not affect contract-based DC schemes such as group personal pensions, where there is already a 30 day cooling off period.
