24 July 2008
Mike O'Brien, minister for pension reform said yesterday that
pension schemes can use their existing methods of calculating pay
when working out whether they will be exempt from placing employers
into the national personal accounts from 2012.
The move follows heavy lobbying from industry bodies who had
concerns that legislative plans meant to prevent rogue employers
undermining the new system could in fact lead to the closure of
good pension schemes.
The Government's original plans held that all pay, inclusive of
overtime and bonuses, would count towards working out the pay band
which 7% of earnings must be contributed to the new personal
accounts. However, the pensions industry and consultants said that
most current schemes did not include fluctuating pay elements, like
commission and bonuses, as part of pensionable pay. Most schemes
paid in more than the minimum 3% employer contribution required by
the new personal accounts.
Mike O'Brien agreed that employers will be able to use their
existing arrangements to calculate qualifying earnings where that
will produce at least as good, or a better, pension outcome than
would have come from personal accounts.