UK - Iain Duncan Smith, a former Conservative party leader, has been appointed secretary of state for work and pensions in the UK's first coalition government for more than 30 years.

Following the resignation of Gordon Brown last night, David Cameron, the leader of the Conservative Party becomes  prime minister, and Nick Clegg, leader of the Liberal Democrat Party, deputy prime minister.

In charge of the Department of Work and Pensions, Duncan Smith will oversee the upcoming pension reforms scheduled for 2012 including the introduction of auto-enrolment into occupational pensions and the establishment of the National Employment Savings Trust (NEST).

However in the past former Conservative shadow work and pensions secretary Theresa May, and former shadow minister for pensions, Nigel Waterson had warned of concerns with the interaction between the new system and pensions means-testing. With May stating in December 2009: "There is a clear need to review the personal accounts project and a Conservative government would do just that." (See earlier IPE article: Tories to review means-testing with personal accounts)

In the coalition agreement the two political parties have agreed to "phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women. We agree to end the rules requiring compulsory annuitisation at 75".

It also stated the government would establish an independent commission to review the long-term affordability of public sector pensions, while protecting accrued rights. In addition it will link the state pension to earnings from April 2011 with a "triple guarantee" that pensions are raised by the higher of earnings, prices or 2.5%.

Rachel Vahey, head of pensions development at Aegon UK, said: "Iain Duncan Smith takes charge at a time of enormous pressure to meet short-term fiscal challenges. But we can't ignore the longevity pressures that are putting the pensions system under strain in both the public and private sector."

She pointed out the previous government was set to break the link between income tax rates and pensions tax relief through a series of successive changes, however the coalition agreement does not mention the issue of pension tax relief.

Vahey said: "We urge the new coalition government to call an immediate halt to further changes to pension tax relief and to look at simpler alternatives to the proposals already announced to restrict higher rate tax relief, such as introducing a lower annual allowance."

"Both Conservative and Liberal Democrat manifestos contained some interesting proposals aimed at encouraging more pension saving, such as early access to pension funds and removing the requirement to secure a retirement income at age 75. But instead of this piecemeal approach we would encourage the government to conduct a wider review of what motivates people to save - both financial incentives and behavioural aspects of how people approach these decisions in the real world," she added.

The appointment of a pensions minister to replace Waterson after he lost his seat in a surprise Liberal Democrat election victory last week is expected in the next few days, although sources suggest the role may go to Steve Webb, the former Liberal Democrat shadow spokesman for work and pensions. (See earlier IPE article: UK roundup: UK election, Croydon, John Lewis, Freshfields)

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