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UK bill aims for greater clarity

The UK government is set to strengthen occupational pensions under new measures introduced in its pensions and social security bill in December. The bill proposes a third of all scheme trustees be member nominated.
Scheme members should also be provided with clear information on what their probable pension entitlement will be, with scheme procedure information made freely available.
Furthermore, greater accountability will be required from occupational plans for scheme wind-ups, with the Occupational Pensions Regulatory Authority (OPRA) given a supervisory role in any fund insolvency.
And all parties involved in a dispute will be given an equal hearing before the pensions ombudsman.
Pensions minister Jeff Rooker, comments: “We’re introducing these measures because we recognise the important role that occupational pension schemes play in providing security in retirement. We want to encourage more employers to provide occupational pension schemes and more employees to join them.”
The bill also proposes calculation methods for the new state second pension (S2P) – the replacement for the state earnings related pension scheme.
Employees earning below the low earnings limit (LEL) for 1999/2000 will be treated on an earnings platform of £9,500 (e15,000)for the year. The same rule will apply for workers entitled to invalidity care. Suggested accrual rates then shift from 40% on earnings between LEL and £9,500; 10% on earnings from £9,500 and £21,600, and 20% above £21,600 to the upper earnings limit of £26,000.
Another suggestion is a rebate to personal pensions with non-occupational stakeholder pensions enhanced to reflect the S2P accrual rate.
Occupational plans should be rebated at the SERPS accrual rate of 20% on earnings above the LEL, with a top-up provided to individuals in contracted-out pensions earning up to £9,500 and extended to those earning up to £21,600. Provision is also made for stage two of S2P – to be introduced once stakeholder pensions are established – whereby all employees earning above LEL will be treated as if they earned the basic £9,500 and a 40% accrual rate applied.
Rooker adds that the proposals directly target low earners who may be unsure whether they are better with a private pension than in the state scheme. “We propose that people on lower earnings should get a top-up via the state scheme on the difference between their actual earnings and £9,500.” Hugh Wheelan

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