Government plans for pension reform - Responses to the consultation published

In May 2006, the Government published its White Paper on Pensions Reform, entitled "Security in retirement: towards a new pensions system". It proposed measures that, over a forty-year period, would address the pensions funding issues caused by the increase in longevity.

On 30 October 2006, the Government published a summary of the responses to the consultation on the White Paper. Having considered all of the comments received, the Government intends to move forward with the following proposals.

1. In 2012, a new scheme of personal accounts will be introduced, with the following key features:
   
   
   • employees will contribute 4% of a band of earnings of between around £;5,000 and £;33,000 a year
     
     
   • employers will make minimum matching contributions of 3% on the same band of earnings
     
     
   • a further 1% will be contributed in the form of normal tax relief
     
     
   • the employers' contributions will be phased in, likely over three years
     
     
   • automatic enrolment for employees into either the new personal accounts scheme or their own employer's occupational scheme providing it meets a minimum standard
     
     
   • employees will be able to opt out, in which case the employer would not contribute.
     
     

2. Also in 2012, subject to affordability, the basic State Pension will be linked to rises in average earnings. The structure of the State Second Pension will be changed to provide a flat-rate top-up for every year spent working or caring. The residual earnings-related element of the State Second Pension would be withdrawn gradually and would disappear entirely by around 2030.
   
   
3. The contributory principle of the State Pension will be reformed by
   
   
   • reducing the number of years needed to qualify to 30
     
     
   • replacing Home Responsibilities Protection with a new weekly credit for those caring for children
     
     
   • introducing a new contributory credit for those caring for severely disabled people for 20 hours or more per week
     
     
   • abolishing the initial contribution conditions to the basic State Pension.
     
     

4. The State Pension age will be raised in line with gains in average life expectancy. Following the increase in State Pension age for women from 60 to 65 between 2010 and 2020, the same approach will be followed for subsequent increases for both men and women. There will be a a rise from 65 to 66 over a two-year period from 2024, then again by one year over a two-year period from 2034 and from 2044.
   
   
5. The regulatory environment will be streamlined by
   
   
   • abolishing contracting out for defined contribution schemes at the same time as linking the basic State Pension to rises in average earnings
     
     
   • bringing forward legislation to allow schemes to convert Guaranteed Minimum Pension rights into scheme benefits
     
     
   • introducing a rolling deregulatory review of pension regulation, in light of the Pensions Act 2004.

...UK Payroll News - Latest


Source:
Summary of the responses to the consultation
Response to the Work and Pensions Select Committee report on Pension Reform

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Schedule 2 of the Employment Equality (Age) Regulations 2006 sets out those age-related aspects of the operation of occupational and personal pension schemes that will continue to be allowable without having to be objectively justified by the schemes themselves. The Government announced on 8 September that, in order to give schemes more time to adjust to the new rules, these pension provisions will not come into force until 1 December 2006.

A consultation document was published by the Department for Work and Pensions on 11 October 2006 to seek the views of schemes and pension professionals on amendments to the Regulations to clarify and add to the Schedule 2 exemptions. In order for the amendment Regulations to be introduced from 1 December, comments on the proposed changes must be received by 20 October.

...UK Payroll News - Latest


Source:
Consultation on Amending Regulations - Age Discrimination - The Employment Equality (Age) (Amendment No.2) Regulations 2006

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