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The Pensions
Bill must be changed to avoid unnecessary costs to workplace pensions
and undermining retirement savings for low earners, says the National
Association of Pension Funds (NAPF).
The Association of British Insurers (ABI), the Institute of Chartered
Accounts in England and Wales (ICAEW), the Society of Pensions Consultants
(SPC) and the NAPF believe that the Government risks undermining
both retirement savings for lower earners and leaving each pension
scheme with a £25,000 to £100,000 bill if they do not
revise the definition of Qualifying Earnings (“pensionable
pay”) in the current Pensions Bill. This issue is due to be
debated in the House of Lords today (17 June).
Joanne Segars, chief executive at the NAPF, said: “We support
the Government’s 2012 reforms but it is important that they
do not add unnecessary costs to existing pension provision.
“All that is needed is a common sense change to the definition
of Qualifying Earnings and we should see a good outcome for everyone.”
The current Pensions Bill states that all employee pay between £5,035
and £33,540 should be subject to pension contributions, usually
Basic Pay or Basic Pay plus certain agreed amounts. 83 per cent
of FTSE100 companies currently use total basic earnings as the basis
for contributions, and according to the NAPF, the way the Bill is
currently worded will lead many employers to conclude that they
must amend the rules of their pension scheme with considerable costs
as a result.
To ensure that no individual would lose out once Personal Accounts
come into practice, the Bill also proposes that a calculation should
be made at the end of the year, “annual reconciliation”.
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Pensions Age June 2008
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