Highlights of Pensions Bill proposals

by Dr. Ros Altmann

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1. Workers to be automatically enrolled into a pension: Employers will be required to auto-enrol all workers earning between £5,035 and £33,540 (in 2006/7 terms) into a pension scheme, and workers who have opted out will need to be automatically re-enrolled every 3 years. The system will be supervised by the Pensions Regulator.
2. PADA to oversee set-up of personal accounts: For an employer with no pre-existing pension scheme, the Government is setting up personal accounts – effectively a National Pensions Savings Scheme – run by PADA (the Personal Accounts Delivery Authority). This bill extends the powers of PADA, to move from an advisory role to actually overseeing the set up, design and other details of the scheme. My comment: This can be welcomed as far as it goes, but personal accounts risk being sold to those who should not buy them and without proper advice to help people make a correct decision. Women need advice tailored to them, a one size fits all advice system will not be ideal at all, so PADA and Government need to be careful here. See below for more detail.
3. State pension reforms: Qualification for BSP has been reduced to 30 years, which is good, but qualification period for full S2P is still over 40 years. People to be allowed to keep contributing to NI even after pension age. S2P entitlements are being streamlined. My comment: These reforms are less welcome and could still disadvantage women’s state pensions. See below for more detail.
4. Ease requirements for income test for pension credit for over 75’s: From April 2009, pension credit claimants will no longer have to their income reassessed every 5 years. Their income will be taken as applying for an indefinite period (called an indefinite AIP – ‘Assessed Income Period’). My Comment: It will be good to save many pensioners, often single women, from having to resubmit the same information every few years when it really doesn’t change anyway. It will also save money on administrative costs, so that is good too.
5. PPF benefits to be shared on divorce: This change allows payments from the Pension Protection Fund to be shared on divorce or dissolution of civil partnerships. My comment: this is a very sensible measure and probably was an oversight in the previous legislation.
6. Financial Assistance Scheme to be extended: These measures allow the FAS to pay pensioner members who are already getting their full pension from their scheme, so all the assets can be taken in by the Treasury. The Young Review recommended pooling the assets of failed schemes into public ownership. The pension payments can then be made on an ongoing basis, rather than buying annuities. My comment: This is very welcome, but should have been done ages ago. Unfortunately, urgently needed changes are taking a long time and some of the new regulations to finally include all schemes, as well as helping some members in serious ill-health, may not be in place for many months yet. Some of these victims cannot wait that long. Also, the Treasury has not made sufficient concessions on taxation of FAS payments, so many victims will suffer much higher tax deductions on their money, which is very unfair. Then they will have to contact their tax office and negotiate the intricacies of HMRC and wait another year or more to get their overpaid tax refunded. For those already past retirement, this seems very unfair.
7. Extend powers of Pensions Regulator: The Bill extends the Regulator’s powers to appoint trustees to a pension scheme that is in danger. My comment: As final salary schemes die out, this power is most welcome to try to prevent unwelcome changes in corporate structure that could pose a risk to members’ accrued pension rights and/or the PPF.