Those readers with more than a passing knowledge of UK pensions will be aware that the Department of Work and Pensions (DWP) nearly always celebrate the run-up to the festive season by producing at least one significant document.

And this year is no different, with two documents issued only last week. One of these two documents directly refers to the subject of short-service pension refunds.

Now this is a big and important topic for both the pensions industry and employers, and we have been expecting a decision on this for some months now. Those who are behind the pace on this particular story might do well to start with this post: https://www.jelfgroup.com/blog/2011/09/short-service-refunds-ministers-comments/

So what is the final decision?

I quote directly from the DWP document ‘Meeting future workplace pension challenges’:

“Following this analysis of the policy options available to us, we have decided to remove short-service refunds for occupational DC schemes at the earliest legislative opportunity.”

The document then went on to say “we expect the rule change to be introduced as soon as 2014″.

So, that’s pretty emphatic isn’t it? Short-service refunds will cease.

Or will they?

The document then continues with a sentence that could lead the audience to scream ‘Oh no it isn’t’…

“provided we are able to implement an accompanying solution for small pot transfers at the same time.”

Now small pension ‘pots’, and the associated issues for the industry, employers, and of course pension savers, is a REALLY big subject, and it’s probably unlikely that anything like a workable solution could be found between now and 2014. And let’s not forget that the current Government will be looking over it’s collective shoulder at the next election by 2014, so this topic may not be a political priority at that point either.

So, it seems clear that short-service refunds will stop eventually, but it could easily be several years before this particular part of the UK pensions pantomime leaves the stage.

As ever, will keep you posted as things develop.

In the meantime, have a great Christmas and New Year.

Best regards

Steve