UK – With the UK government’s “Green Paper” proposals on pension reform expected to be released from November 27 onwards, IPE-Newsline previews the key issues that will be addressed.
The paper will look at occupational and personal pension policy based on proposals by Alan Pickering, an independent pensions expert. Pickering was commissioned by Alistair Darling, former Secretary of State for Department of Work and Pensions, in September 2001 to produce a report proposing ways in which to simplify the regulation of private pensions.
In his report published in July, Pickering called for an entirely new Pensions Act that would result in a more simplified UK pensions industry. In the report he highlighted ten major areas in need of reform:
- Inflexible legislation/type of regulator
- Guaranteed minimum pensions
- Transfers of pensions
- Prescription on member-nominated trustees
- Communication with scheme members
- Vesting periods in occupational schemes (the right to join immediately)
- Inability of employers to make membership of their scheme a condition of employment
- Compulsory limited price indexation
- Compulsory survivors’ benefits
- Internal disputes resolution rules
Many of these areas were supported by consultants such as Watson Wyatt, Mercer and the Society of Pensions Consultants. They were also backed by authorities such as the National Association of Pension funds and the Confederation of British Industry, the Association of British Actuaries and insurance group Norwich Union and the Association of British Insurers.
In response the government announced that it would consider Pickering’s report, alongside Ron Sandler’s report on UK’s savings market, and the Inland Revenue’s comments on tax simplification, in a green paper, that would “set the Government's proposals for pensions reform in the broadest context.”
Said Andrew Smith, secretary for work and pensions: "Alan Pickering's report makes some valuable proposals to simplify pensions legislation and administrative burdens on schemes and employers. He poses some tough questions which everyone concerned - employers, trade unions and pension providers - as well as government need to think about. It covers complex issues and includes some tough choices. But it is right that we consider all the issues to produce a reform of occupational and personal pensions that stands the test of time.”
As a result, the Green Paper was to address the following points:
- security in retirement
- informed choice for consumers
- simple and proportionate regulation
- ensuring incentives are effective and well understood
- promoting employment amongst older workers
- flexibility to give individuals more choice over the pace at which they retire from the labour market
At the NAPF Autumn Policy Conference last week, however, Smith implied that changes to the system would not be as radical as many may have wished. The fact that the green paper is purely a list of proposed reforms – to be discussed at a later date – is also a disappointment to those hoping for changes to the pension system. The consultation period has already lasted over one year, and pension market players are eager for action.
The green paper is expected to be released some time after the pre-budget report.