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The Pensions Act 2007

The Pensions Bill received Royal Assent on 26 July 2007 paving the way for the introduction of a series of reforms to the UK pensions system.

The government detailed their proposals in May 2006 (Security in Retirement: towards a new pensions system) with the aim of meeting five key tests:

1. Promoting personal responsibility;
2. Simplicity;
3. Sustainability;
4. Fairness; and
5. Affordability.

Changes in the Act include:

• Boosting the basic state pension by restoring the link with earnings, from 2012 at the earliest, and by the end of the next Parliament at the latest
• Reducing the number of qualifying years for entitlement to the maximum basic state pension to 30 from 6 April 2010
• Raising the state pension age to 68 by 2046 in order to reflect increasing longevity and encourage longer periods of working
• A 'Personal Accounts Delivery Authority' to oversee the new trust-based defined contribution occupational pension scheme by 2012

Further enabling provisions for the Secretary of State to decide on include:

• Conversion of GMPs to 'Ordinary Scheme Benefits'
• Abolition of contracting-out for defined contribution pension schemes

The potential impact on administration could extend to:

• Basic State Pension offsets
• GMP conversions
• Changes to DC contributions (with the abolition of contracting out)
• Changes to payroll deductions and systems interfaces
• Provider choice

Whilst some of these changes may seem distant, there are practical implications for pension scheme administration. Do get in touch if you wish to find out more about this or any other service.