Introduction
The Pensions Bill was published
on 12th February 2004 and developed themes announced
by the Department for Work and Pensions to empower
people to take control of their retirement planning. It created the Pension Protection Fund designed
to compensate members of defined benefit and hybrid
schemes whose employers become insolvent. The Pensions
Bill introduced a new Pensions Regulator with aims
to make it easier for companies to operate schemes.
The Bill provided more choice and a better deal
for people who choose to draw their state pension
later including a new option to take a lump sum.
Improving member protection
The new Pension Protection Fund (PPF) is designed to safeguard
benefits build-up in final salary schemes but Andrew Smith,
secretary of state for Works and Pensions, said the fund will
not 'guarantee' the members' pension pots if their company
collapses.
He 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 Pensions Bill aims:
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Establishing the Pension Protection
Fund (PPF); |
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Establishing the PPF Ombudsman; |
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Establishing the Pensions Regulator; |
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Establishing the Pensions Regulator
Tribunal; |
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Scheme funding - striking a balance
between schemes' long-term liabilities and the assets
they are required to hold on an on-going basis; |
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Pension Protection on transfer of employment
Specifying the debt to the pension scheme to the pension
scheme in the case of an employer's insolvency with insufficient
assets. |
Operation of schemes
The new Pensions Regulator that replaces the Occupational
Pensions Regulatory Authority (OPRA) will focus on the under-funding,
fraud and mal-administration that can threaten members' benefits,
whilst minimising interference for the well run schemes.
Employers will have less red tape through simplification measures,
making it easier to offer pension schemes to employees. Schemes
can set their own investment strategy and there will be simplified
regulations for trustees, dispute resolution and contracting-out.
The Pension Bill aims:
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Mechanism for resolving
disputes between schemes trustees and scheme members; |
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Changing the rules on limited
price indexation so that it is capped at 2.5% instead
of 5%; |
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Modifications to rules
for private pension schemes which are contracted out of
the State Second Pension (previously SERPS); |
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Clarifying that overpayments
of pension benefits may be recouped through deductions
from future payments. |
Taking State Pension late
The age at which people start to receive their state pension
will remain 65 and nobody will be forced to work beyond that
age. However, rewards will be given to people that choose
to defer taking their state pension.
The Pensions Bill aims:
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Better enhancements to
the pension where it is deferred ; |
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A lump sum option ensuring
schemes are run for their members; |
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At least one third of scheme
trustees must be nominated by the scheme members; |
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Trustees must inform members
of their investment principles; |
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Trustees must have knowledge
about the issues that they deal with; |
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Ensuring that pension contributions,
in particular by employers, are made in good time. |
Promoting pensions
The Pension Bill will allow the promotion of financial
planning for an individuals retirement. This will include
estimating the financial resources the individual will need
after retirement, the resources available from pensions and
other sources and what action might be taken to increase the
financial resources available to the individual after retirement.
The Pensions Bill aims:
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Promoting and facilitating
financial planning for retirement, including introducing
an online retirement planner; |
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Making it compulsory for
occupational pension schemes to provide combined pension
forecasts if sufficient numbers do not take up this option
voluntarily; |
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At least one third of scheme
trustees must be nominated by the scheme members; |
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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 the retirement planning; |
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Extending data
sharing gateways between DWP and other bodies to allow
Departmental analysts to use the data for policy modeling
and development with respect to private pensions. |
Additional measures
The Pensions Bill also aims to:
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Safeguarding the accrual
of pension rights during periods of paid statutory paternity
and adoption leave; |
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Clarifying the ways in
which revaluation of accrued pension rights can be calculated; |
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Clarifying definitions
with respect to stakeholder pensions; |
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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 retirements 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; |
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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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