Welfare Reform on the Web (April 2002): Pensions - UK

CAMPAIGNERS ANGRY AT LIMITED PENSION REFORM

A. Jolliffe and R. Bennett

Financial Times, Feb. 6^th 2002, p. 4

At present contributors to pension schemes have to invest the proceeds in an annuity by the age of 75. There is pressure to abolish this requirement. However, the government has proposed a more modest reform that would allow people to buy annuities for limited periods instead of having to buy one product for the rest of their life. They could transfer to another company, or to another annuity with the same company.

A GOVERNMENT THAT SENTENCES PENSIONERS TO PENURY WILL NEVER BE FORGIVEN

F. Field

Times, Feb. 21^st 2002, p. 22

• Urges government to bolster up occupational pension schemes by:
• encouraging the linking of pensions to average rather than final salary;
• abolishing the FRS17 accounting regulation;
• cutting red tape;
• abolishing Advanced Corporation Tax.

MILLIONS OF WORKERS "MAY BE CONTRACTED BACK INTO STATE PENSION"

A. Bolger

Financial Times, Jan. 30^th 2002, p.4

William M. Mercer, benefits consultants, have said that the latest reductions in national insurance rebates introduced by the government may encourage many new and existing company schemes to contract back into the state second pension. They estimate that in the next five years there could be a reduction of 3m in the number of people contracted out.

(See also Guardian, Jan. 30^th 2002, p. 26)

A PENSION'S FOR LIFE

M. Milner

Guardian, Feb. 18^th 2002, p. 13

Companies are switching from defined benefit pension schemes under which pensions are based on a percentage of final salary to defined contribution schemes. Under these schemes individuals' contributions are invested and the pension paid is dependent on stock market performance. Risk is thus transferred from employers to workers.

AN UNCOMFORTABLE RETIREMENT

F. Field

Financial Times, Feb. 18^th 2002, p. 29

The closure by employers of final salary pension schemes is threatening the retirement incomes of middle class people. The new stakeholder pension aimed at encouraging people on low or middle incomes to join a scheme has flopped. Author proposes the establishment of a Universal Protected Pension to address these difficulties. This would combine the existing National Insurance pension with a funded element.

(See also Daily Telegraph, Feb. 19^th 2002, p. 29)

UNIVERSAL PROTECTED PENSION: MODERNISING PENSIONS FOR THE MILLENNIUM

Pension Reform Group

London: 2002

Recommends a new funded pension, the Universal Protected Pension. Funding for this scheme would come from a 5% increase in National Insurance contributions. Also proposes to severely limit the use of means testing of elderly people.

WARNING TO SHOVE UP LEVEL OF PENSION CONTRIBUTIONS

A. Bolger

Financial Times, Feb. 19^th 2002, p.4

Warns that employees who are offered "defined contribution" occupational pensions face ending up with retirement incomes 30% lower than their peers in final salary schemes unless they make private provision for themselves. Volatility of costs and the impact of the FRS17 accounting standard are leading companies to increasingly abandon their "final salary" pension schemes.

THE WAY WE LIVE NOW

T. Evans

Pensions International, no. 35, Nov. 2001, p. 12-13

Argues that the UK government is undermining defined benefit occupational pension schemes through an excessive burden of bureaucratic regulation. Focuses on the adverse impacts of the minimum funding requirement and FRS17, a new accounting standard.

(See also Financial Times, Feb. 13^th 2002, p. 2)