Press Release
Lords Must Act To Prevent Pension Savers Being Short-Changed
17 June 2008
The Pensions Bill must be amended to ensure that millions of people in workplace pensions are able to benefit from contributions based on their full salary, say a powerful group of pension organisations.
The ABI, NAPF, ICAEW and SPC have produced a briefing document for members of the House of Lords, ahead of the Bill’s Committee Stage in the Lords today (17 June). Amendments, which we are urging Their Lordships to support, will be tabled and discussed during the debate.
Maggie Craig, the ABI’s Director of Life and Savings, said:
“For pension reform to succeed, there must be more savers, saving more for their retirement. Workplace pensions already serve millions of people very well, and the extension of automatic enrolment to these schemes will benefit millions more. But people will lose out if the qualifying earnings rules, which are sensible for personal accounts but not for other pension schemes, are applied across the board. We are urging the House of Lords to pass these amendments and ensure that millions of pension savers are not short-changed by the Government’s proposals.”
The problem arises due to the ‘Qualifying Earnings’ limits for personal accounts, the proposed new pension system for low and moderate earners. Under the Government’s plans, contributions will be paid into personal accounts only on earnings between £5,035 - £33,540, with the employee putting in 4% and the employer 3%, with a further 1% top-up via tax relief.
However, existing workplace and occupational schemes, which in any case have typical employer contributions of around 6%, calculate contributions based upon the whole basic salary of employees, from the first pound that is earned. The danger with the legislation as currently drafted is that employers could be forced to change scheme rules to accommodate the more limited personal accounts earnings band. This would leave millions of consumers short-changed, yet cost the pensions industry millions to implement the changes. Amendments that the ABI and others are encouraging the Lords to accept would prevent this from happening.
Latest Press Releases
- PPI has never been a more valuable product
- ABI - Consumers will benefit from the right reforms to financial advice
- Economic slowdown encourages more companies to take up trade credit insurance
- ABI appoints Huw Evans as director of coreporate affairs
- Safeguarding the future: ABI calls on chancellor to promote saving and stability
- ABI customer impact report: progress made but challenges remain
- Portillo and Brand to headline the 2008 financial media awards
- Government personal injury reform proposals are a missed oportunity
- Floods agreement addresses public concerns
- Personal Accounts Charging Structure Must Be Fair And Sustainable Says The ABI
Spread your message to an audience that counts, with options available for our website, email bulletins and publications including The House Magazine.
