Betrayal of Deferred Pensioners: Despite all the strong protests the government has decided that there is to be a reduction in the cap on the revaluation of future accruals of deferred pensions from 5% to 2.5%. (5/12/07)
The reviewers' report and the Government response was published on 22/10/07 which proposed reducing the indexation of future deferred pensions to 2.5%. Tthe OPA responded opposing this (13/11/07).
The DWP Deregulatory Review of Private Pensions was published on 25/07/07 and the proposal to remove indexation of pensions in payment has been shelved. It is important to remember however that those who advocated this policy may well try to revisit this issue at a later date so the following details will remain as as a reminder:
The following is extracted from Chapter 3, Security in retirement: towards a new pensions system. Summary of responses to the consultation. October 2006
6. The deregulatory review was widely welcomed by respondents.
“We support the Government’s intention to conduct a rolling regulatory review of pensions legislation. In addition to those areas listed in paragraph 2.42 of the White Paper, we recommend that the Government also carry out cost benefit analyses of the legislation relating to employer debt and Normal Pension Age and examine how best to modify legislation to more closely fit modern risk-sharing pension scheme designs. We would be very happy to assist the DWP in this review.” (Watson Wyatt Ltd)
“We welcome proposals for a rolling deregulatory review of pensions legislation … it must focus on those issues that will have biggest impact on simplifying the pensions framework, giving schemes some flexibility and reducing schemes’ running costs.” (National Association of Pension Funds)
7. Although there was support for a deregulatory review, there were two general areas of concern raised by respondents. Some respondents stated that the review was only worthwhile if measures that had a significant impact resulted from it, and were concerned about whether the Government would be determined enough to implement measures that could attract opposition. Other respondents wanted to ensure the protection of members’ benefits and were concerned that the review could recommend measures that could adversely affect members’ benefits. These views represent the two sides of the debate.
8. Generally, respondents were either keen that particular policy areas were considered or apprehensive that they might be. Of particular concern to several respondents was the area of accrued rights, including allowing retrospective increases to pension scheme ages. There were strong representations on both points of view.
How the Government will take this forward
9. The Government welcomes the positive reaction to the proposal for a review and is grateful for respondents’ suggestions of areas to consider and those to avoid.
10. The deregulatory review will examine regulation of private pensions with the aim of simplifying and reducing the burden of legislation on employers and pension schemes governing private pensions, drawing on proposals from stakeholders and taking account of the balance between member protection and encouraging employer provision of pensions; and having regard to appropriate legal and other constraints.
11. Although it will be difficult, the Government’s view is that it is important that the review aims to build a consensus on the issues of concern to schemes and the appropriate solutions. The Government recognises that occupational pension schemes face significant challenges. The review will seek to establish agreement among key stakeholders about those challenges, the options available to schemes to cope with them and the recommendations that should be made.
12. An advisory group has already been established and is supported by a team from within the Department for Work and Pensions. The advisory group* consists of external stakeholders and it has representatives from the Association of British Insurers, Association of Consulting Actuaries, Association of Pension Lawyers, Confederation of British Industry, Faculty and Institute of Actuaries, Investment Management Association, National Association of Pension Funds, Society of Pension Consultants and Trades Union Congress. The group has met three times and has begun to develop proposals for consideration.
13. In two areas identified by stakeholders, the Government has already taken action. It has decided not to proceed with a series of amending regulations on disclosure, proposing instead to conduct a zero-based review of disclosure principles in both occupational and personal pensions. On payments to employers where the scheme is in surplus, the Government has launched an informal consultation process, with a view to developing proposals to reduce the regulatory burden in this area.
14. The review will report to Ministers in the first half of 2007, having undertaken analysis and consulted upon emerging conclusions. The review will have an important role to play in generating debate on the key issues to be tackled and the best approach to use.
*Note the absence of the OPA from this list even though we are listed as having made a response and made our opposition to cuts in pensions in payment abundantly clear.
See also Pension cuts
The new chief executive of NAPF,
Joanne Segars, has listed the changes she considers to be priorities for change as follows.
1) Change age at which scheme benefits are paid in full
2) Easing restrictions on changes to accrued rights
3) Modification to debt on employer so that solvent employers do not have to buy annuities for all members
4) change indexation of pensions in payment
5) Changes revaluation of deferred pension in period between leaving employment and drawing the pension
(See p50 of the NAPF response to Security in Retirement for details.)
|Even with indexation based on the RPI, pensioners are gradually falling behind in purchasing power - see Indexation