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Welfare Reform on the Web (February 2000): Pensions - UK

THE IMPACT OF DEFLATION ON PENSIONS AND PENSION FUNDS

R. Bootle

London: National Association of Pension Funds, 1999

Warns that government could be forced to bail out occupational pension schemes and implement further reductions in the state-funded pension if the economy enters into a sustained period of deflation.

PENSIONS GLOOM PUTS PRESSURE ON BROWN

P. Webster

Times, Oct. 13th 1999, p. 2

Reports that Gordon Brown is facing pressure to make extra provision for pensioners since their annual increase will amount to less than £1.00 a week next year. The headline rate of 1.1% inflation in September 1999 will translate into a pension rise of £0.75 per week from April 2000 for those on the basic state pension.

PENSIONS REDUCTION BUNGLE WILL COST £1bn

N. Timmins and R. Peston

Financial Times, Oct. 15th 1999, p. 1

Reports that ministers will delay for at least 5 years implementing a plan that would have halved the Serps entitlement of surviving spouses whose partner died after April 2000. A final decision on the precise length of deferral and its cost is still being negotiated. Cost of deferral for 5 years is estimated at £1bn.

(See also Daily Telegraph, Oct. 12th 1999, p. 8; Times, Oct. 12th 1999, p. 31; Guardian, Oct, 12th 1999, p. 23)

SCOTTISH FIRMS OPT FOR UNION'S PENSION

R. Jones

Guardian, Oct. 12th 1999, p. 24

Reports that more than 800 Scottish electrical contracting companies have signed up to the AKEU's prototype stakeholder pension scheme.

STAKEHOLDER PENSIONS SHOULD BE COMPULSORY, SAY INSURERS

A. Garfield

Independent, Oct. 25th 1999, p. 15

Reports that leading insurers are warning that stakeholder pensions will have to be made compulsory if the government is to achieve its goal of widening the scope of private pension provision to include the lower paid.

STAKEHOLDER PENSIONS: THE TAX REGIME: THE GOVERNMENT'S PROPOSALS

Department of Social Security and Inland Revenue

London: 1999 (Consultation brief; 6)

Proposes a single tax regime for stakeholders, personal pensions and group personal pensions. Employers' defined contribution schemes can opt into the new regime. There will be a contribution limit of £3,600 net of tax, regardless of earnings. More can be contributed using existing limits for personal pensions. Personal pension rules on carry forward/carry back are to be abolished, but contributions above £3,600 can continue for five years after earnings cease and continue up to £3,600 thereafter. The government believes that parallel holding of money purchase schemes and final salary schemes would chiefly benefit the better off, and therefore proposes no change, but is open to persuasion. Contributors will need to be UK resident, have taxable UK earnings, or be covered by the Crown Duties Act.

STAKEHOLDER PLANS ATTRACT SCEPTICISM

S. Targett

Financial Times, Sept. 20th 1999, p. 11

Some of the biggest pension providers are warning the government that they may refuse to become involved with the stakeholder scheme unless plans to impose a price cap on fees are reconsidered.

TOUGHER RULES URGED ON PENSION ACCOUNTING

M. Peel

Financial Times, Nov. 4th 1999, p. 1

Reports on proposed accountancy reforms that are likely to accelerate the shift away from traditional occupational pension schemes based on final salary towards cheaper money purchase schemes managed by life insurers that do not promise to pay a defined benefit when workers retire.

(See also Guardian, Nov. 4th 1999, p. 27; Times, Nov. 4th 1999, p. 34 + 37)

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