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

A BETTER CHOICE OF PENSION

R. Kelly

Financial Times, Mar. 13th 2002, p. 19

People in private pension schemes are obliged to use the returns to purchase an annuity. The problem with this is that many pensioners, through poor advice, choose low value or inappropriate products. As things stand at present, they cannot move to a more appropriate product later, but are locked in for life.

THE DANGERS OF A CHANGE OF PLAN

J. Guthrie

Financial Times, Feb. 25th 2002, p. 14

Article discusses the legal implications for employers of closing final salary pension schemes. They may find themselves in breach of contract if scheme membership was offered in employees' employment contracts. Even if it was not, employers closing their schemes may be deemed to be in breach of their duty to maintain trust and confidence. Finally, closing a scheme may breach its trust deed and involve the employer in haggling with the trustees.

EMPLOYEES "FACE RENEWED RISK" IN PERSONAL PLANS

D. Hargreaves

Financial Times, Feb. 22nd 2002, p. 5

Companies that close their final salary pension schemes often offer employees a lump sum to transfer out. There is a danger that the unwary will invest this in much less lucrative personal pensions.

THE GREAT PENSIONS ROBBERY

K. Jackson

Financial Times, Feb. 26th 2002, p. 21

Occupational pension schemes are under serious pressure. Article proposes a range of measures to promote their recovery, including restoration of the Advance Corporation Tax Credits to occupational schemes, reinstatement of compulsory membership, and introduction of compulsory employer contributions.

(See also Financial Times, Feb. 26th 2002, p.1)

NEW BLOW FOR PRIVATE PENSIONS

Anon

Independent, Mar. 13th 2002, p.19

Reports that life insurance companies, including Prudential and Equitable Life, are advising policy holders to switch back into the second state pension as falls in the value of shares decimate returns from private pensions.

(See also Financial Times, Mar. 13th 2002, p.1 & 4, Daily Telegraph, Mar. 13th 2002, p. 40, Financial Times, Mar. 14th 2002, p. 1. Independent, Mar. 14th 2002, p. 12

A NEW CONTRACT FOR RETIREMENT

R. Brooks, S. Regan and P. Robinson

London: Institute for Public Policy Research, 2002

Main proposals of this report are:

  • a £100 week basic state pension which would rise each year in line with earnings rather than prices;
  • a rise in the retirement age from 65 to 67 by 2030;
  • free personal care for the elderly in England and Wales;
  • phasing out of the state second pension for people not in company schemes;
  • higher national insurance payments for the better-off.

(See also Financial Times, Mar. 6th 2002, p. 19)

THE PARTY IS OVER FOR EASY PENSION PROVISION

A. Kaletsky

Times , Mar. 7th 2002, p. 22

Explains why the introduction of the new accounting standard FRS17 has given companies an excuse for closing their generous "final salary" occupational pension schemes and replacing them with "defined contribution" schemes which transfer risk to the workers.

PENSION PLOY IS RISKY, TORIES ADMIT

K. Maguire

Guardian, Mar. 13th 2002, p. 12

The Conservatives are developing proposals to abolish the basic state pension and replace it with individual funds largely based on stock market investments.

POLICY SEEN AS COMPLEX AND FAILING ITS TARGET AUDIENCE

N. Timmins

Financial Times, Mar. 14th 2002, p. 3

Summarises the Labour government's pensions policy, and the fierce criticism to which it is now subject. "Final salary" occupational pensions are imploding due to red tape and stock market volatility, and stakeholder schemes have flopped. Meanwhile, government reforms of the state pension system are seen as too complex to be workable.

(See also Guardian, Mar. 14th 2002, p. 27)

UNION CALLS FOR BAN ON PENSION PLAN SWITCHING

N. Timmins and P. Jenkins

Financial Times, Feb. 27th 2002, p. 4

UNISON has called for legislation to debar companies from switching overnight from final salary to less generous money purchase occupational pension schemes. It says that if companies do offer money purchase schemes, they should be compelled to contribute at least 6% of salary to them. In the meantime government has attempted to help final salary schemes by easing the minimum funding requirements, giving them three to ten years to restore any underfunding, rather than the current one to five.

(See also Daily Telegraph, Feb. 27th 2002, p. 34; Guardian, Feb. 27th 2002, p. 19)

WORK UNTIL 72 FOR A DECENT PENSION

A. Sparrow

Daily Telegraph, Feb. 27th 2002, p. 8

Argues that a fall in the value of pensions means that workers contributing to a group scheme would need to work for seven years beyond the age of 65 or face a big loss of retirement income. The only alternative would for workers to increase pension contributions.

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