19 November 2004 - Security and confidence in pensions – The Pension Bill receives Royal Assent
A central part of the Government’s strategy to promote, simplicity, security and choice in UK pensions was realised last night when the Pensions Bill received Royal Assent.
Building on the success of ending poverty for millions of existing pensioners, the Pensions Act will, for the first time, offer substantial security to 13 million members of defined benefit pension schemes, through the creation of the Pension Protection Fund and the establishment of the pro-active Pensions Regulator.
Alongside the PPF, the Pension Act contains the Financial Assistance Scheme (FAS) which will provide help to thousands of workers whose pension schemes wound-up with insufficient funds and an insolvent employer.
The Pensions Act not only offers greater security for workers’ pensions, it will also empower individuals to make informed choices about when and how to save, and make providing pensions easier for employers through a raft of simplification measures – cutting through the layer-cake of scheme regulation.
Welcoming Royal Assent, Secretary of State Alan Johnson, said:
“I am proud the bill has now become law. This will now offer millions of people security which means they can look forward to their retirement with confidence.
“The PPF and FAS will make a considerable difference to the pensions landscape. People will no longer be left and high and dry if their pension scheme gets into trouble. For those who have already lost out, the £400 million FAS will be able to provide help now where previously nothing was available. The Government is tackling pensions issues for today’s and tomorrow’s pensioners and I warmly welcome this essential piece of legislation”
There will be improved information to workers about the choices available to them regarding retirement provision, giving workers better access to quality information in the workplace, an on-line retirement planner, allowing individuals to see in a matter of minutes their retirement options, and for the first time, an opportunity to defer your state pension and receive a lump sum, (example defer for 5 years = up to £30k)
Commenting on the forthcoming changes, Pensions Minister Malcolm Wicks said:
“We have always said that people face some tough choices about what they want in their retirement. This Act helps facilitate difficult choices – making the information easier to access, more straightforward and more relevant to them. Options like deferring your state pension will mean people can make decisions that better suit them and their lifestyle.
“This Act is not just about occupational pensions, we are helping pensioners, workers and pension providers. It will provide a framework for pensions and the choices and decisions that go with them that is more relevant to the world we live in now.”
Notes for editors
- The Pension Bill was originally published on 12th February 2004 and can be found at: http://www.publications.parliament.uk/pa/ld200304/ldbills/125/2004125.htm
- It received Royal Assent on 18th November 2004 and can be found at: http://www.legislation.hmso.gov.uk/acts/acts2004.htm
- The Act also contains the following:
Requirement for member-nominated trustees and directors
The Act encourages more scheme members to have more direct involvement in the running of their scheme.
Obligations of trustees of occupational pension schemes
The Act requires trustees to understand relevant scheme documentation, and have an appropriate knowledge and understanding of
pensions and trust law.Consultation by employers
The Act will make a statutory obligation on employers to consult members of pension schemes before making major or significant changes to future pension arrangements.
Pension protection on transfer of employment
The Act gives employees with access to an occupational pension scheme with employer contributions the right to ongoing employer pension provision where there is a business transfer to which the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations apply.
Scheme funding
The Act sets out provisions which provide for the replacement of the current standardised Minimum Funding Requirement, to a requirement for ongoing schemes to hold sufficient funds to meet their accrued pension commitments when they fall due to be paid.
Annual increases in rate of pensions
To reduce the burden on occupational defined benefit pension schemes, the Act provides for the limited price indexation cap to reduce from 5% to 2.5%.
The Act also removes limited price indexation from defined contribution benefit rights accrued post April 1997.
Contracting out
The Act removes some of the restrictions that currently apply to contracted-out rights in occupational money purchase schemes and personal pension schemes which have opted out of the Additional State pension. The provisions remove the minimum age from which protected rights can be paid enabling them to be paid at the same time as all other rights. This will ease schemes’ administrative burden in handling these rights and intends to represent a significant simplification of the contracting out regime.
Internal dispute resolution
Existing legislation on the requirement for schemes to provide a procedure for dealing with disputes has been criticised for being too rigid and prescriptive. Legislation in the Act replaces this with new requirements which are much simpler, allow a one or two stage process, and will allow schemes to adopt procedures that are best suited to the way they operate.
Financial planning for retirement
The Act contains measures to take forward the wider Informed Choice Agenda set out in the February 2004 Command Paper ‘Simplicity, security and choice: Informed choices for working and saving’.
It enables the development of a new web-based retirement planner, which will signpost users to non-governmental sources of independent and impartial advice. The web based planner, due to be launched in Spring 2006, will allow people to see a forecast of their current projected income from state and private pension provision. The planner will also provide a direct link to the Pension Tracing Service website.
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