Pensions Bill 2011 Published
The Government has today published the Pensions Bill 2011, which introduces a number of new measures previously announced by the Coalition Government as part of the Spending Review.
Workplace Pension Reform
Since October 2001, employers with 5 or more relevant employees have been required to provide access to a stakeholder pension (for further information on this click here). This requirement is soon to be replaced with the introduction of auto-enrolment from 1 October 2012, which will require employers to provide employees with a workplace pension plan or enrol them in the National Employment Savings Trust (NEST).
Employers will be required to contribute to the plan and operate payroll deductions of their employees' contributions.
The new requirement will be introduced into stages according to the size of the employer. The minimum contribution levels will be phased in over a period up to 1 October 2017. Further information on auto-enrolment can be found by clicking here .
The key measures for workplace pension reform in the Pensions Bill 2011 are:
- Aligning the earnings threshold for automatic enrolment with the personal allowance for income tax
- Permitting an optional waiting period before enrolling new employees of up to three months
- Simplifying the process for employers to certify that their money purchase schemes meet the auto-enrolment requirements
- Increasing the flexibility for employers on re-enrolment dates
- Allow contributions to be taken towards the cost of providing personal pension benefits to current judicial pensions scheme members
The Minister for Pensions Steve Webb said:
"This Bill will radically transform the pensions landscape in this country. Millions of people, who currently have little or nothing put by for their retirement will, from 2012, find themselves enrolled in a workplace pension - setting them on the road to a more secure future."
The Pension Protection Fund
The Pensions Protection Fund (PPF) is also adjusted in the Pensions Bill 2011. In particular, the change to the indexation of the pension compensation payments will now be with reference to the Consumer Prices Index instead of the Retail Prices Index.
The other PPF measures in the Pensions Bill do not impose burdens on business or others. The PPF estimate that the change to indexation of pension compensation will produce a reduction in their current liabilities. This reduction represents a transfer from current members of the PPF to employers sponsoring defined benefit schemes through a compulsory levy. The other measures in the Bill relating to the PPF deliver moderate savings in administrative costs to schemes in a PPF assessment period.
State Pension Age Changes
In addition to the changes made to auto-enrolment and the PPF, the Bill introduces the increase in the State Pension Age to 66.
To view a copy of the Pensions Bill and its attachments click here