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Changes to the Pensions Act

The following are details of forthcoming changes to UK pension schemes.  This follows last year’s Pensions Act 2007 in which the Pensions Act, published in May 2006 and the Pensions Bill, published on 5th December 2007, outlined proposed changes to the British state pensions system.

One of the most notable changes is the intention to make employee enrolment in a pension scheme compulsory by 2012.  The ‘personal accounts scheme’ will be, according to the government, a low-cost savings vehicle to reduce the risk of future generations having to foot the bill of an ageing population.

Duty will fall upon employers to enrol employees between the ages of 22 and state retirement age, in a pension scheme, and also to provide a minimum contribution.  Employers’ 3% minimum contribution will, along with around 1% in tax relief, supplement the 4% contribution deducted from employees.

The Pensions Act 2007 has been drafted because of the increasing longevity of the population.  People are simply living longer, and there is not yet adequate provision to cope with this.  Both employers and employees are advised to follow the changes closely, as part of the legislation includes strategies to enforce compliance with the new schemes.  Don’t hesitate to get in touch if you need clarification with regard to your position.

The Act brings other changes including a reduction of the years needed to qualify for a state pension.  Women, who currently need 39 years to qualify, and men, who currently need 44 years, will both need to work for just 30 years to qualify for British state pension after the legislation comes into force.

Another change is the gradual increasing of the state retirement age to 68.  Employees nearing retirement age needn’t worry, however, as these changes won’t be fully implemented until 2046.

For more information contact our Financial Services Director David Higgins on 020 8458 7427.

This article has been provided by UK200Group.

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