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TPAS Newsletter - April 2011

New! Spotlight On...

We have published one more factsheet this month.

Click here to visit our publications page and view all our factsheets

Update! Universal State Pension

The Pensions Minister, Steve Webb has announced plans to reform the state pension system. A new Green Paper 'A state pension for the 21st Century' sets out two different options for simplifying the state pension for future pensioners. 

The first option involves retaining the two components of the state pension - the basic state pension and the second state pension - but moving the second state pension onto a flat rate by 2020. A flat rate pension is one which is based on an individual's contribution record and not linked to their earnings. The second state pension is currently due to move on to this system from the 2030s.

The second option would replace the two components with one flat rate pension of around £140 a week. This is more than the current guarantee element of the means tested Pension Credit.

If implemented, the new state pension would be payable to anybody reaching state pension age on or after the date the change becomes law. Anybody who had already reached state pension age before that date, whether or not they had actually claimed their pension, would not be affected.

The new state pension would continue to be based on an individual's National Insurance contribution record. The full pension would be payable after 30 qualifying years of National Insurance contributions. There would be a minimum level of 7 years of National Insurance contributions to qualify.

The Government has made a commitment to honour any pension entitlement already built up under the state pension scheme, if it is more than the new state pension.    

The public consultation ends on 24 June. A White Paper would be issued later this year if the Government decides to proceed with any reforms.

The Green Paper also sets out two ways for linking future rises in the state pension age to increases in life expectancy. The first is to use a formula to automatically link increases in life expectancy to increases in state pension age. The second is to introduce a system of regular reviews to consider the latest life expectancy projections.   

We will keep you updated.

Click here to visit the DWP's website and view the consultation documents

Equitable Life News

Equitable Life announced this week that existing with profit policyholders are to be rewarded with a 12.5% increase to their funds at retirement.

Only with profit policyholders who draw their pensions on or after 1 April 2011 will qualify.  Policyholders who had retired before 1 April 2011 or had transferred away, will not qualify.

Eligible policyholders started to receive notifications of their eligibility from Equitable Life at the end of March 2011.

This announcement is in addition to the compensation scheme announced by the Government last year.

Click here to visit Equitable Life's website and read their announcement 

Prudential Wins Pension Increase Claim

The High Court has this month upheld Prudential's right to cap the discretionary increases paid to the pensioner members of its staff pension scheme.

Historically, pensioner members of the scheme received discretionary increases each year in-line with the Retail Price Index (RPI).  In 2005, Prudential decided to cap those discretionary increases at 2.5%.  The members challenged this so Prudential took the case to the High Court.

Mr Justice Newey ruled that Prudential's decision was not irrational or perverse.

Click here to read the High Court ruling in full

Prudential To Pay £4m Compensation

39,000 policyholders are being contacted by Prudential about incorrect valuations on old Scottish Mutual unit-linked pension funds.  The error with the valuations happened between 2004 and 2008.

Prudential will make correction payments to the affected plans, with compensation expected to total £4m.

Early Access Plans Dropped

We previously reported (see January's newsletter) on the Government's consultation on the early release of pension funds for people in financial hardship.

The Government has concluded that "there is limited evidence that allowing early access would have a positive effect on overall pension contribution levels, or provide significant help to individuals facing financial hardship".  They will not be considering this matter further at present time.

Click here to visit HM Treasury's website and read their conclusions

Reminder! State Pension Age Increase To 66

The Government is planning to make State Pension Age (SPA) changes from April 2016.  Their plan is to speed up the increase to 65 for women and then bring forward the increase for men and women to 66.

Click here to visit the SPA page of our website for full details

Live Q&A

We hold a live online Q&A session on the second Wednesday of every month.  During the session, our experts will answer any pension related questions you may have.

The next live online question & answer session is on Wednesday 11 May 2011 between 2pm and 3pm.

Click here for further information about the Live Q&A and view previous sessions

Website Feedback

We're always keen to know how our website can be improved.  Please therefore take a couple of minutes to fill out our feedback form.

Click here for further information

Become a TPAS Adviser

TPAS is manned primarily by volunteers.  We are always on the lookout for new volunteers so, if you work in the pension industry and want to give some of your spare time to helping people with pension information and guidance, please let us know.

Click here for more information about volunteering

Contact Us

If you have any pension questions, please feel free to contact us by calling our helpline on 0845 601 2923, emailing enquiries@pensionsadvisoryservice.org.uk or writing to us at 11 Belgrave Road, London, SW1V 1RB.

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