Green Paper on Pensions Reform
The long awaited Green Paper on pensions reform “Simplicity, Security and Choice: Working and Saving for Retirement” has now been published. Whilst inviting comment on a range of proposals designed to overhaul the pensions sector and fill the widening “savings gap”, it is not the radical re-think of pensions strategy for which many pressure groups had been hoping. A quick reference guide to the main proposals is provided below.
The ACT Technical Committee will be commenting to the government on the proposals contained in the Green Paper. Ted Hoefling, Group Treasurer at Taylor Nelson Sofres plc, who leads the Pension Working Group would welcome any comments or points which you feel the ACT should be making, or, indeed, volunteers to make a larger contribution. Please contact Ted direct here or e-mail ACT Technical
Key consultation proposals in the Pensions Green Paper - Promoting Employment Amongst Older People
- The State Pension age would remain at 65
- Measures are proposed to give individuals more choice to extend their working lives, including legislating against age discrimination, ending compulsory retirement ages except where there is justification and raising the normal pension age in the public sector for all new entrants to 65
- Those who defer taking their State Pension for five years or longer could see a 50% increase in their weekly payment or potentially a lump sum
- The option to continue working for the sponsoring employer whilst drawing their occupational pension could become available, opening flexible routes into retirement.
Informed Choice for Individuals
- Initiatives to increase the availability of comprehensible and high quality information on options for planning for retirement
- A new pensions advice line and an improved web-based retirement planner
- Extended coverage of combined state and occupational pension forecasts to encourage timely saving.
A Simpler Tax Pensions Framework (see separate Hotline article)
- Abolition of the current eight separate pension tax regimes
- A single, lifetime limit on the amount of tax-privileged pension saving - with a lifetime ceiling of around £1.4 million and an annual limit of £200,000
Pensions and the Workplace
- Proposals estimated to save employers between £150-£200 million a year in pensions administration
- Further support for workplace saving education, including workplace packs and promoting total benefit statements in the workplace to raise awareness of both employers' and employees' contributions
- Possibility of allowing schemes to make pension membership a condition of employment
- Reforms to the Minimum Funding Requirement (MFR), saving companies £80 million a year alone, and allowing trustees to invest more appropriately given the characteristics of their own particular membership
- Sweeping simplification of the contracting out rules
Protection
- A new proactive regulator to focus on protecting scheme members particularly where there is a high risk of fraud, bad governance or mal-administration
- Fairer allocation of assets when schemes close, with more priority for workers within 10 years of retirement or those with more years of contributions
- A range of measures to explore scheme insurance, increase fraud compensation and prevent executives withdrawing from failing schemes
Building Trust and Understanding in Financial Services
- Increased access to saving by developing the Sandler Suite of stakeholder products and introduction of mechanisms to provide low cost advice
- Reform of the annuities market by introducing value protected and limited period annuities
- Improved consumer regulation of equity release and home reversion plans
- More investment training for trustees
