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BeeHive  >  BeeLines  >  Update on the Pensions Bill

Update on the Pensions Bill

First things first. Weíre going to get a Pensions Act passed by Parliament later this year and that, together with this yearís Finance Act will set the scene for our pension system in the UK after A-Day in April 2006. Exciting isnít it? Itís been a great year so far, but many of you tell me youíre struggling to keep up with where the story has got to so far and that youíre in danger of losing the plot as all this stuff is chugging through the process of turning from Bills into Acts. If you find yourself in that embarrassing position and canít tell even your best friends about it, have no fear, Iím about to summarise it all for you. Then you can get back into the swing of avidly watching all the various bits and pieces fall into place with the rest of us trapped here on Planet Stakeholder.

Iíll deal with the Pensions Bill first I think and thus get the hardest one out of the way. Then, when Iím fully recovered Iíll put out another BeeLine later in the week doing the much easier job of summarising the Finance Bill and where thatís at.

The Pensions Bill provides the basic framework designed to deliver what the Government refers to as ďThe social policy agendaĒ which will lead to ďIncreased consumer confidence in pensionsĒ (Iím not making this up, by the way) and will do it in a way that changes social security legislation to achieve two main things. Firstly theyíve got to put changes in place to support the new pensions tax regime that this yearís Finance Act will be putting together, and secondly theyíve got to get our social security legislation in line with European Directives. These include the IORP Directive (which you really donít want to hear about at this stage) and the equally mind-boggling Information and Consultation Directive.

The Bill, youíll be happy to know, will just provide the basic framework. The detail will be filled in later by delegated legislation, which will not be available until after the Bill becomes an Act. So, realistically that will be sometime next year, or maybe even the year after for some of it.

The parliamentary process to get the Pensions Bill through has been fairly intense and, I think itís fair to say, more than a little confusing to anyone who has taken their eye off of it for more than a minute or two.

Version 1 of the Bill was published on the 12th of February 2004 and that went immediately into the Standing Committee stage. Following that Version 2 was published on the 29th of April. Now, that had to go through the Report Stage and then its third Reading and it eventually surfaced as Version 3, which was published, if you remember, on the 21st of May. (Keep awake at the back there!)

The Bill is now in the House of Lords. In fact it is currently at the Committee Stage in the House of Lords. Unbelievably for something that has gone so far through the processes, amendments can still be made to the Bill at this stage. In fact, we know changes will be made because the Government made it clear during the Report Stage in the Commons that they still have amendments to add.

Anyway, after all that palaver the Pensions Bill is expected to return to the House of Commons and at that stage I think weíll put out a detailed summary of the provisions of the Bill on the BeeHive. With so much of it up in the air at the moment it doesnít seem worth summarising the detail any sooner quite frankly. But donít hold your breath waiting for it. I have just looked at the parliamentary website and it seems that the Bill is not expected to finish itís committee stage in the Lords until after the summer recess. Basically, theyíve timetabled time in for it in September so that looks a bit of a give away. I would guess the Pensions Bill wonít receive Royal Assent until October or November time, so all the predictions that the Pensions Act will come out Ďin the Autumn of 2004í look spot on. Donít forget, by the way, that the Winter Solstice this year falls on December the 22nd, so Autumn officially stretches to December the 21st again. Itís going to be another one of those Christmases in the Bee household. I can see it coming already!

Anyway, what I can tell you is that the Pensions Act, when we see it, will not be as clear-cut and straightforward as you might have hoped. For a start, a split implementation is expected. Although the changes to support the new pensions tax framework neednít be in place until A-Day on 6th April 2006, other bits and pieces of the Pensions Bill will probably be implemented in 2005. So itíll take a bit of careful watching if you want to get your head around it all. The key dates are obviously April 2005 and April 2006, but at this stage no decisions have been made regarding implementation dates as far as I can see.

Unlike the Finance Bill, which is introducing retrospective legislation, the Pensions Bill does not replace all existing social security legislation in respect of pensions. It will add to it and amend existing legislation. (The Pensions Act will not be a codifying act, if you want to be posh about it.) In addition there will be a heavy reliance on regulations, which is another key difference with the Finance Bill.

The split implementation means that the focus will almost certainly be on getting the Pensions Protection Fund (PPF), the new Pensions Regulator and Financial Assistance Scheme up and running, and all the detailed changes to support the new tax regime will probably be put on the back burner for a while. Our best guess at the moment is that as well as the PPF and the new Regulator coming in during 2005, weíll also see the changes to scheme funding coming in then too, particularly as the requirements of the IORP Directive have to be in place by 23rd September 2005 anyway. The same with changes to ensure the safeguarding of pension rights that should have been incorporated into UK law donkeyís years ago. Likewise, while Iím at it, all the stuff on consulting members on changes to pension schemes that the Information and Consultation Directive requires us to put on the statute books in 2005. A lot more of our pension laws are driven by European Directives than you might think and I may even go through some of that in a bit more detail in a future BeeLine, who knows?

The changes to Section 67 of the 1995 Pensions Act, the simplifying of contracting-out, the removal of the requirement for employers to provide AVCs etc etc, and all the rest of the things that keep cropping up in the various newspaper stories every time anyone mentions the Pensions Bill will probably be left until 2006 I should think. So I donít suppose weíll be getting to see the nitty-gritty on much of all that until the Government have got the PPF in place and have put occupational schemes on an even keel and have got the European Directives out of the way.

Summary-wise, thatís about it I guess. The top line is the Pensions Act will come out some time before Christmas, but lots of the detail will be filled in later on during 2005. Not only that, but the provisions of the Act will be implemented in two stages, the first in April 2005 and the second in April 2006. If you keep popping into the BeeHive Iíll give you a blow-by-blow account of all the fiddly bits as they come to the surface and weíll bring out useful summaries of the detailed provisions when all of the current amendments have gone through and things have settled down a bit. I mean, how goodís that? Pretty good, Iíd say...

Steve Bee
20 July 2004

This information is based on Scottish Lifeís understanding of the draft Pensions Bill published on 12 February 2004 and subsequent updates. This is draft legislation and may be subject to change.