Pensions Bill published as government responds

The government has published its Pensions Bill. Incorporating changes prompted by last month’s Work and Pensions Committee report on the draft bill (with its response also published today), the bill sets out the government’s plans for reform of the state pension, introducing the single-tier state pension (STP) and increases in the state pension age.

Work and Pensions Select Committee Labour MP and chair Dame Anne Begg, welcomed some of the changes, including a decision to include the implementation date of the STP and minimum qualifying period in the bill.

“This will help provide the clarity and certainty so vitally needed by the public, the pensions industry and employers, “ Dame Begg said. “Central to the success of the reforms is that people understand how they will be affected by the changes. We also welcome, therefore, the government’s recognition of how crucial it is for it to have an effective communications strategy in place at an early stage.”

However, concerns raised by the committee over the starting rate for the STP, the differential between the level of the STP and means-tested Pension Credit, and “derived rights” to a State Pension were not addressed, Dame Begg added.

“The last of these will particularly affect a number of women quite close to State Pension Age (SPA). These women had a legitimate expectation under the old system that they would be able to rely on their husband’s National Insurance contributions to give them entitlement to a Basic State Pension. They will not have this right under the Single-tier.”

The bill also includes the Pensions Regulator’s new funding objective, with an amendment to ensure that it “minimises any adverse impact on the sustainable growth of an employer”,

Punter Southall technical director Joanne Livingstone said: ““The starting pistol has been fired on the marathon round of debate required to bring about a change in the funding regime. We know from the Regulator’s annual funding statement earlier this week that it has indicated a softened stance on how trustees should set their assumptions and recovery plans.

“Today’s new objective for the Regulator to ensure no adverse effect on sustainable growth of an employer will have real implications for trustees and employers. This development signals a game changing shift."

The CBI also welcomed the change, as well as powers in the bill to allow businesses to offset additional costs caused by the introduction of a single state pension and the end of contracting out.

“This must apply to all businesses, including those with protected person status. State pension reform cannot be an excuse to raise business costs in these tough times,” CBI director for employment and skills Neil Carberry said.

He added: “Now the focus must be on making the single state pension and the rise in state pension age a reality, and ensuring auto-enrolment is a success. Businesses need certainty on the new rules for state pensions as soon as possible if the Government is to go ahead with the faster introduction announced in the Budget.”

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