The Government has revealed radical plans to subsidise the low-paid to
stay in occupational pension schemes.
The move will ensure the low-paid do not stop contributions and rely on
It has been welcomed by the National Association of Pension Funds and
The NAPF has repeat edly warned the Government about the damage its
pension reforms could do to exist ing schemes.
The Department of Social Security set out the plans in its consultation
document for the Serps' replacement, the state second pension (S2P), this
But Scottish Equitable is warning the absence of details on how rebates
will be calculated, whether flat-rate or age- related, is a “glaring
Under the plans, people earning less than £9,500 a year will receive a
top-up via the S2P to stay in their existing scheme.
The paper sets out two possible options for contract ing out. The first
outlines an S2P top-up for those earning less than £9,500.
The second option is to top up S2P for anyone earn ing below £9,500 and
ext end that top-up to those in occupational or personal schemes to those
who earn less than £21,600.
Pensions minister Jeff Rooker says: “The paper directly addresses the
position of people on lower earnings who might be better off in the state
scheme rather than in a private pension scheme.”
Liberal Democrat soc ial security spokesman Steve Webb says: “Finally, the
Gov-ernment has woken up to the issue of people on low earn ings opting out
of occupat- ional schemes.”
Scottish Equitable pensions development manager Steve Cameron says: “By
focusing on the issues for salary-related schemes, the proposals omit any
discussions over whether personal pension and stakeholder rebates will
continue to be age-related. If not, this is bad news the older you get.”