UK - The UK government has revealed that the cost of private pension reform to UK businesses under the current economic climate is behind a decision to slow the implementation of future pensions auto-enrolment.
In his pre-Budget speech to the House of Commons today, Alistair Darling, chancellor of the exchequer, announced plans which were designed to achieve "£5bn (€5.5bn) of savings from [government] spending programmes, including [the] phasing-in the roll-out of pension personal accounts".
In the full Pre-Budget Report, the government said the implementation of state pension reforms will start in April 2010. But while it "reaffirms its commitment" to implementing the package of private pension reforms, including auto-enrolment and personal accounts, finance ministry officials have admitted to a delay.
It stated: "Reflecting the changed economic and fiscal circumstances and the cost of this reform to business as the economy recovers the government announces a change to the implementation of private pension reform, including to the timetable for employers joining the reform."
Details of the changes are unclear, although a costings table included in the report noted that in 2012-13 "Pensions auto-enrolment: slower introduction" would result in a tax saving to the Treasury of £100m (€110m), but "in 2013-14 the yield is £0.7bn, in 2014-15 the yield is £1.6bn".
Tim Jones, chief executive of the Personal Accounts Delivery Authority (PADA), said: "The government has made absolutely clear that it is committed to the pension reform programme. As the chancellor said in his speech, the reforms are going ahead, and the employer duties will be staged in from October 2012 as planned.
"However, the government is adjusting some of the details of how the duties will be implemented and will announce details of that early next year. The personal accounts scheme will launch in low volumes in 2011 and will be ready for the onset of employer duties from October 2012," he added.
Meanwhile Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), expressed disappointment at the delay. She noted that while the start of auto-enrolment remains as 2012 "it will not be fully operational until 2017, a year later than planned."
Darling also announced plans to cap public sector pension contributions from the state by 2012, which it estimated would save around £1bn a year from 2012-13 and "at least twice this amount over the long-term".
The PBR document noted that cost increases below the cap would be shared equally between employers and employees, while those cost increases above the cap would be met solely by employees. It also stated public sector workers earning the highest salaries will be expected to pay a greater contribution towards their pension.
Other pension issues raised in the announcement included confirmation that employer pension contributions would be included in the calculation of employees' income to see whether they reach the £150,000 cap for higher rate tax relief, effectively lowering the cap to £130,000. The government has issued a 12-week consultation on the changes which will close on 3 March 2010.
Mark Duke, head of pensions at Towers Perrin, said: "The pensions tax regime is set to become an administrative quagmire. To hit the government's tax gathering target, it has been decided to increase the affected group by around 30%. This has been achieved by counting company pension contributions as income when testing whether someone has breached the £150,000 pa threshold."
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