back

 


The Pensions Bill at a Glance

The Guardian

February 12, 2004

· Establishment of the pension protection fund (PPF) 
Designed to provide greater security for members of occupational pension schemes. 
Currently, if you are a member of an occupational pension schemes and your company goes bust, you may find yourself facing significantly reduced payouts when you come to retirement. 
In future, should a company that runs a pension scheme go under, the PPF will pay out 100% of the original pension promise to members of the scheme who have reached pension age, and 90% to people below that age. 
The fund will be paid for via a levy on all company pension providers in the private sector. This will be a flat rate fee to begin with, but will later be charged in line with risk, so less solid companies will have to pay more. 
There will also be protection for members should their employer be taken over by a different company, to ensure that pensions-related promises are kept. 

· Establishment of the pensions regulator 
Designed to replace the existing pensions regulatory body, Opra. 
At present, Opra (the Occupational Pensions Regulatory Authority), whose role is to safeguard the interests of pension scheme members, focuses on specific breaches of pension legislation. The new regulator will have greater flexibility and be more pro-active when tackling fraud and poor administration. It will have powers to gather, retain and share information, helping it to identify schemes where members' interests may be at risk and intervene accordingly. 

· Introduction of rewards for delaying taking the state pension 
Those who defer taking the state pension will receive better rewards when they do take it. A new option of taking the deferred pension in a lump sum is also to be introduced. 

· Reduction in red tape 
The bill included the introduction of a mechanism for resolving disputes between pension scheme trustees and scheme members as well as changes to the rules for schemes opting out of the state second pension (which replaced SERPS). 
There will be changes to the rules on "limited price indexation". Currently, all "approved schemes" and "exempt approved schemes" (final salary and money purchase occupational pension schemes, for example) have to increase pension income during retirement at limited price indexation, or in line with the retail price index, up to a level of 5%. That 5% cap will now be reduced to 2.5%, in an effort to ease the pressure on pension schemes. 

· Safeguarding of pensions should circumstances change 
The accrual of pension rights during periods of paid statutory paternity and adoption leave will be protected under the new bill, and employees will not lose the pension benefits they have accrued if they chose to change jobs. 


Copyright © 2004 Global Action on Aging
Terms of Use  |  Privacy Policy  |  Contact Us