The Pensions Commission has now published its second report setting out its conclusions on the likely evolution of the UK pension system if policy is unchanged, and recommendations for change.
Some of the key recommendations in the Report are:
- All employees to be automatically enrolled (with the right to opt out) in either a new National Pension Savings Scheme or an employer arrangement. Minimum default contributions would be payable set at about 8% of earnings above the Primary Threshold (currently £94 per week) and below the Upper Earnings Limit (currently £630 per week). 4% should be paid out of individual post-tax earnings; 1% paid for by tax relief; and there should be a 3% compulsory matching employer contribution. There should be a Target Annual Management Charge of 0.3% or below. The Report recognises that it would be difficult to get this up and running before 2010.
- Accelerate S2P move to a flat-rate pension by freezing the Upper Earnings Limit for S2P accruals in nominal terms.
- Index the basic state pension to earnings growth and ideally introduce a universal basic state pension for pensioners aged over 75.
- increase in life expectancy, for instance to 66 by 2030, 67 by 2040 and 68 by 2050.
- Contracting-out to be phased-out gradually. For Defined Benefit Schemes, the contracted-out option should be maintained, but phased out, at the latest, by about 2030. For Defined Contribution schemes, the contracted-out rebate should be abolished.
Copies of the Report and an executive summary are available at:
http://www.pensionscommission.org.uk/publications/2005/annrep/annrep-index.asp
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 01/12/2005.
