Introducing the single-tier state pension in 2016 risks sparking a fresh round of final salary scheme closures in the private sector as companies struggle to implement changes in such a short timetable says the NAPF.
Chancellor George Osborne yesterday told the BBC’s Andrew Marr show that the single-tier pension and long-term care cap would both be brought in a year sooner than originally planned.
But the NAPF has questioned whether implementing the change is possible within the shorter timetable without causing serious damage to existing private sector DB provision.
It points out that the Government’s plan to allow schemes to adjust scheme benefits through the application of a “statutory override” will require new legislation.
But the announcement has been applauded by campaigners fighting for a better dead for 85,000 older women born between April and July 1953, who are nearly 60 years old and who would have missed out on the single-tier pension because they would have reached state pension age before it came in.
Joanne Segars, Chief Executive, NAPF, says: “We are squarely in favour of these vital reforms, but the Government must ensure that the implementation of these changes is workable for pension funds. This is a very tight timeframe and we have to wonder if it can be delivered.
“If the Government gets it wrong then this runs the risk of sparking a fresh round of final salary pension closures in the private sector. Businesses who get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and they will question whether they want to continue running these pensions. It is essential to give pension funds the flexibility and time to adapt and make the changes.
“We have waited many years for these reforms. An overhaul of the state pension is long overdue and this simpler, fairer system helps set a clear foundation on which people can build their own savings. It would be a shame if big mistakes were made in a rush to implement the changes.”
Ros Altmann, pension consultant and campaigner says: “The Treasury seems to have over-ridden the DWP on this issue. When the pensions minister appeared before the DWP select committee last week, he produced figures to try to show that many of the women affected would not really lose out much by being left out of the new state pension, but the analysis was not entirely convincing. The DWP paper did analyse the impact separately for the 85,000 women worst affected by the delay in start date – those who had suffered a second rise in state pension age. It looked at all women born from April 1952 to July 1953, rather than separating the sub-group born from April to July 1953. The DWPs partial analysis was rather misleading and it seems that the Treasury has decided to override DWP opposition to an earlier introduction of the new state pension and insists it must start in April 2016 after all.
“These women felt doubly aggrieved. Firstly, because the Government had broken a commitment made to them in the 2010 Coalition Agreement that their state pension age would not be increased and secondly because Ministers had then also broken the commitment that they would be included in the new state pension system.
“The reason it was so indefensible to start the state pension reform in 2017, was that Ministers had previously promised all women who had to accept a second increase in their state pension age, at very short notice, would at least be included in the new state pension in order to ensure they were compensated for delay in receiving it. The Coalition Agreement in 2010 promised that women’s state pension age, which was already increasing from 60 to 65 between 2010 and 2020 under legislation from 1995, would not be increased again before 2020.”