Life companies are dismayed at the Government’s decision to press ahead with the abolition of contracting out for defined-contribution pension schemes.
The Pensions Bill published last week included plans to raise the retirement age to 68 from 2024 and reduce the number of qualifying years needed to get a full basic state pension for men and women.
Work and Pensions Secretary John Hutton said this move would mean that almost 500,000 more women over the state pension age in 2025 will be entitled to a full basic state pension. The bill also confirms plans to link the basic state pension to earnings. These moves get widespread support.
Standard Life says it supports the main changes in the bill which it hopes will help ensure women will no longer be in retirement poverty.
But it warns that the bill “is not a panacea for all pension ails” and criticises the decision to ban contracting out for defined-contribution schemes.
Marketing technical manager Andy Tully claims that scrapping contracting out for DC schemes will move around 3bn a year from private pensions to unfunded state pensions – which is the opposite of what he believes should be happening.
He says: “It is critical that the Government takes other measures to improve overall pension coverage. This bill does not move us forward in the key areas of means-testing and levelling down and we are concerned that levelling down of existing pension provision is a serious threat.”
Aegon says it is disappoin-ted that the Government intends to push ahead with plans to abolish contracting out for defined-contribution schemes from 2012 and downgrade the state second pension to a flat-rate scheme.
It considers that these measures will make S2P highly redistributive and go against the aims of the Pensions Commission and the Government to encourage earnings-related privately funded pensions.
Association of British Insurers director general Stephen Haddrill says the reforms are a step in the right direction but he raises concerns over the lack of plans for a delivery authority to set up NPSS personal accounts.
He says: “On the delivery authority, the bill raises more questions than it answers. The imminent pensions White Paper should set out specific details of how the delivery authority will operate beyond the first 18 months mapped out in the bill.”