The government has scrapped the proposed Limited Price Indexation (LPI) on money purchase schemes in order to increase flexibility and make life easier for scheme members.
This was announced yesterday by Baroness Hollis during the House of Lords' second reading of the Pensions Bill.
The Department for Work and Pensions believes the latest amendments to pending pensions legislation will represent a significant simplification for DC schemes as it effectively has removed complications caused by several different indexation regimes.
Minister of state for pensions Malcolm Wicks says: "Removing indexation from defined contribution schemes will help scheme members by giving them greater choice in the type of annuity that they will be able to purchase with their pension rights.
"The annuity choices that people make affect their income in retirement and therefore their quality of life. It will therefore be crucial that those providing pensions ensure that people have the information they need to make a well informed choice."
He concludes: "We know that the removal of indexation on DC schemes will be welcomed by many scheme members and many within the pensions industry."IFAonline
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