Pension legislation is welcome and long overdue
Despite its flaws, the Bill helps create a leveller workers’ playing pitch
And of course, despite the myriad promises of Government, it likely makes permanent the pension levy in a move that will further undermine the benefits of pension scheme members. This will be a sore point particularly for members of defined-contribution schemes who must pay the levy but receive no benefit for it.
Peter Fahy, a partner and benefits expert at Eversheds notes that while members of “doubly insolvent” schemes are guaranteed 50 per cent of their benefits, active and deferred members of a scheme wound up by a sponsoring employer have no such protection. The best they can hope for is that pensioners will lose some benefit to bring other members outcome closer to the 50 per cent threshold.
“There is a strong disconnect here which may lead to unintended consequences,” he notes.
And the Government has yet to clarify just how it will protect this 50 per cent of benefits.
There is nothing in the legislation – at least as outlined yesterday– about indexation - and whether the thresholds will rise over time in line with consumer prices to ensure consistency.
Equally, very specifically, it will do nothing to address the thousands of workers who have lost chunks of their pension rights while the Government dithered over recent years.
End of an era
More significantly, the additional regulatory focus in the Bill and the locking-in of losses in benefits for underfunded schemes at viable employers seems designed to accelerate the end of the defined-benefit pension model.
Finally, of course, the measures only exacerbate the growing inequity between pension provision in the public and private sectors.
The Government has ducked these issues for far too long. It deserves credit for finally looking to provide a fairer deal for all players in the pensions sector, even if the Minister spent too long yesterday focusing on the low cost of the reforms to the State rather than the more fundamental issue of fairness.
Whether it succeeds remains to be seen.