Forum Brief: Pensions Bill

Workers will have their pension funds protected under new government plans.

Party Response: Liberal Democrats

Steve Webb MP, Liberal Democrat shadow work and pensions secretary said: "As it stands the Pensions Bill is half baked.

"The Pension Protection Fund is an insurance scheme not based on risk. It’s like asking a careful driver to pay the same as a boy racer. To ask all companies to pay the same punishes the good guys.

"There is nothing in these proposals to help the tens of thousands who have already lost all or part of their promised company pension. The government has a moral duty to compensate them."

Forum Response: Help the Aged

Mervyn Kohler, head of public affairs at Help the Aged, said: "It is vital that pension schemes are safe and trustworthy, because public confidence has been so badly eroded.

"The new regulator and pension protection fund could be important parts of the way forward, but there is a danger they will add to the cost burden on pension funds, so reducing the benefits to members and the enthusiasm of employers to sponsor pension schemes.

"Some of the simplifications, such as limiting price indexation to a maximum of 2.5 per cent, could also be dangerous. One element which seems, crucially, to be missing from this bill, is any encouragement or incentive for employers, which might stem the tide of pension scheme closures.

"Schemes need also to be worthwhile, and deliver real benefits to members. They need to be constructed on the firm foundation of state pension provision, which remains off the government's agenda while occupying the top slot on nearly everyone else's. Whilst state provision is mired in the complexities and inefficiencies of means-testing, the chances of rekindling enthusiasm for second tier pensions are slim."

Forum Response: Age Concern

Age Concern director General Gordon Lishman said: "We strongly support the principle of the Pension Protection Fund, which is necessary to restore confidence in defined benefit occupational pensions. Never again should people who have paid into a pension scheme for many years be left with next to nothing if their employer goes bust.

"The Pension Protection Fund must be able to set premiums which reflect risk and also ensure that remaining defined benefit schemes are retained. Lessons from around the world show that schemes like this can be effective and can work without causing moral hazard. However the first line of defence must continue to be regulatory scrutiny to ensure that all schemes are adequately funded.

"Although the Pension Protection Fund will provide an essential safety net for employees in the future, it offers no help to the many people who have lost almost everything through no fault of their own in recent years. It is essential that the government examines other options to compensate them."

Forum Response: Barclays Bank

A spokesperson for Barclays said:"Barclays welcomes the comments from Andrew Smith (secretary of state for work and pensions) that the pension protection fund will raise its levy based on the strength of the corporate sponsor and riskiness of the pension fund.

"However, until the detail of the mechanics of the pension protection fund becomes clear, we remain concerned that the pension protection fund will be an additional and expensive cost for employers."

Forum Response: Association of British Insurers

ABI’s head of pensions and savings, Joanne Segars said: "The Pensions Bill is a golden opportunity for the government to take concrete, comprehensive action to further boost confidence in savings.

"One in four of people questioned in our original Pensions and Savings Index (September 2003) said the existence of a pension protection fund would increase their trust in pensions. The government must stand behind the PPF and make absolutely sure that it is sustainable, delivers on promises and does not give false hope. But the Bill must go beyond this if we are to close the £27 billion savings gap.

"The ABI has also called for an affordable package of fiscal incentives for pensions advice in the workplace and to encourage employers to contribute to their employee pensions schemes. Research shows that an employer contribution of just five per cent can boost pension scheme membership to 70 per cent. This compares to a rate of 13 per cent where no employer contributions are made.

"The government has put forward some strong, workable reforms on defined benefit schemes. But we will continue to urge them to rid defined contribution schemes of archaic and inconsistent rules as well.

"People must be able to understand their pension. The reforms in the Pensions Bill and recent announcement on informed choice are encouraging and we will continue to work with the department at looking at ways to identify speedy, practical ways of implementing them."

Forum Response: ARPO50

Don Steele, director of social policy for ARPO50, said: "The government's aims as set out in today's Pensions Bill, and its original green paper, are 'Simplicity, Security and Choice'. There is, however,little evidence that any of these will be fully achieved. 

"Many will see the omissions in the Bill as far more significant than its attempts to fine-tune the current occupational pensions system.

"Forty one per cent of workers in this country do not have an occupational pension and this number is growing every year.

"Why, therefore,is the government not adopting a more radical and courageous approach to the state pension - making it the primary source of income in retirement rather than a safety net?

"Why is it encouraging people to work beyond 65 when there are no employment rights for those making such a choice?

"Why is it telling people to 'save more' when it knows that money poured into the private pensions industry gives no guaranteed return?

"Why is encouragement being given to defer receipt of the state pension when the benefits of doing so are so meagre?

"Why is the position of women being dealt with in such a cursory manner - with a total disregard for those suffering the consequences of earlier policy?

"In 1999 (the last date for which figures are available) 25 per cent of older divorced women were living on £80 per week.

"Although highlighting the plight of those who, in future, lose pensions through company closures and introducing a 'safety net' paid for by business, the potential for wrangling and compromise is immense.

"When this diluted scheme is eventually adopted it is unlikely to meet the expectations of employee or employer. Additionally, people who have already lost pension funds through company closures will not be compensated, raising both economic and moral questions, which no one appears ready to answer.

"Any such avoidance tactics are likely to lead to more company pension scheme closures and a possible switch to defined contribution schemes where responsibility rests solely on the shoulders of the employee.

"While the government's intention to make pensions more simple and available is to be welcomed, the stated means of achieving this end are sorely inadequate. The Association is not convinced that this latest Bill is anything other than more tinkering; the plight of present pensioners has been completely ignored and the security of those retiring in the future has not been adequately faced."

Forum Response: Occupational Pensions Regulatory Authority

Tony Hobman, Opra’s chief executive told ePolitix.com: "Opra welcomes the publication of the new Pensions Bill. The draft legislation is designed to enhance protection for pension scheme members in a changing environment. We have learnt from our experience that a regulator needs a wider range of powers in order to respond quickly to the needs of a diverse pensions industry. The Pensions Bill contains legislation that will enable the proposed Pensions Regulator to operate with greater flexibility and pro-activity.