12 February 2004 - The Pensions Bill - simplicity, security and choice
The Pensions Bill was published today with details of the Pension Protection Fund which will provide new security for pension scheme members.
Commenting, Secretary of State for Work and Pensions, Andrew Smith said:
“Where companies with under-funded pensions have gone bust, workers have found themselves severely short-changed on the pension they were expecting. With the Pension Protection Fund, people in pension schemes can be much surer that they will get the pension they were promised.”
The Fund will be complemented by a flexible Pensions Regulator which will make it easier for businesses to get on with running good pension schemes. It will focus on the under-funding, fraud and mal-administration that can threaten members’ benefits, whilst minimising interference for well run schemes.
Simplification measures will also make it easier for employers to provide pensions, by cutting through red tape. Schemes will be freed to set their investment strategy to their own particular characteristics, and a host of regulations around administration – including on trustees, dispute resolution and contracting-out – will be simplified.
The Bill is part of a wider programme of pension reform. Last week’s Command Paper Informed choices for working and saving, outlined steps to empower people to take control of their retirement planning. People will be provided with individually tailored pension information and the advice they need to ensure they can understand it. Tax simplification would replace eight tax regimes with a single system.
The Bill also provides for a better deal for people who choose to draw their state pension later – including a new option to take a lump sum. The age at which people start to receive their state pension will stay at sixty-five, so no-one is forced to work beyond that. But, by tackling age discrimination and freeing people to work part-time whilst drawing a pension, people will be given the choice to work longer if they wish.
Notes for editors
You can find more information in the Pension Reform section of the DWP website:
The Pensions Regulator: http://www.dwp.gov.uk/lifeevent/penret/penreform/5_reg.asp
Pension Protection Fund: http://www.dwp.gov.uk/lifeevent/penret/penreform/4_ppf.asp
Taking up the State Pension later: http://www.dwp.gov.uk/lifeevent/penret/penreform/6_sp.asp
Read the whole Pensions Bill:
(This link takes you to the United Kingdom Parliament site)
When introduced the Pensions Bill will include the following measures:
- Improving member protection
- Establishing the Pension Protection Fund (PPF)
- Establishing the PPF Ombudsman
- Establishing The Pensions Regulator
- Establishing The Pensions Regulator Tribunal
- Scheme funding: striking a balance between schemes’ long-term liabilities and the assets they are required to hold on an on-going basis
- Pension protection on transfer of employment
- Specifying the debt due to the pension scheme in the case of an employer’s insolvency with insufficient assets
Making it easier for firms to run schemes
- Mechanism for resolving disputes between scheme trustees and scheme members
- Changing the rules on limited price indexation so that it is capped at 2.5% instead of 5%
- Modifications to rules for private pension schemes which are contracted out of the State Second Pension (previously SERPS)
- Clarifying that overpayments of pension benefits may be recouped through deductions from future payments
Rewards for taking the state pension late
- Better enhancements to the pension where it is deferred
- A new lump sum option
Ensuring schemes are run for their members
- At least one third of scheme trustees must be nominated by the scheme members
- Trustees must inform members of their investment principles
- Trustees must have knowledge about the issues that they deal with
- Ensuring that pension contributions, in particular by employers, are made in good time
- Promoting and facilitating financial planning for retirement, including introducing an online retirement planner
- Making it compulsory for occupational pension schemes to provide combined pension forecasts if sufficient numbers do not take up this option voluntarily
- Requiring employers to provide access to information and advice in the workplace if the pilots indicate that this helps people to make better choices about their retirement planning
- Extending data sharing gateways between DWP and other bodies to allow Departmental analysts to use the data for policy modelling and development with respect to private pensions
- Safeguarding the accrual of pension rights during periods of paid statutory paternity and adoption leave
- Clarifying the ways in which revaluation of accrued pension rights can be calculated
- Clarifying definitions with respect to stakeholder pensions
- Clarifying that where a person is entitled to more than one of the same category of retirement pension, they can choose in writing as to which of these retirement pensions they wish to receive. In the event of no written notice being given, they will be entitled to the one which is most favourable to them.
- Regularising the payments of certain UK benefits including retirement pensions, Widow’s Benefits and Bereavement Benefits to people with protected National Insurance contributions records due to periods of Australian residence.
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