The National Association of Pension Funds (NAPF) has said that the Pensions Bill must change to avoid unnecessary costs to workplace pensions and to avoid undermining retirement savings for low earners.
According to the NAPF, the government will risk undermining both retirement savings for lower earners and leaving each pension scheme with a bill of between £25,000 and £100,000 if it doesn’t revise the definition of Qualifying Earnings (pensionable pay) in the Pensions Bill.
The Pensions Bill, which is due to be debated in the house of Lords on Tuesday 17 June, states that all employee pay between £5,035 and £33,540 should be subject to pension contributions from 2012. However most pension schemes currently use a different basis for contributions- usually basic pay. And the way that the Bill is worded could cost employers a considerable amount to amend their scheme.
The NAPF and other industry bodies including the Association of British Insurers (ABI) and the Society of Pensions Consultants (SPC) want the definition of Qualifying Earnings in the Pensions Bill for schemes already set up or close to being set up, to remain as it is and related to basic pay.
Joanne Segars, NAPF Chief Executive, said:”We support the governments 2012 reforms, but it is important that they do not add unnecessary costs to existing pension provision.
“All that is needed is a common sense change to the definition of Qualifying Earnings and we should see a good outcome for everyone.
“Ministers have underlined that they want the new Personal Accounts scheme to have a minimal impact on existing provision so we are hopeful that they will try to accommodate our concerns.”