Minister acts on personal accounts
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.