Ministers warned previously the plans would “reduce security” for members
Pensioners have voiced concerns over Labour’s plans to allow employers to withdraw funds from pension schemes, a move that ministers have previously conceded would “reduce security” for members. The proposal, initially introduced under the Conservative Government last year, would allow companies sponsoring direct benefit (DB) schemes to more easily access surplus funds in pots.
This was intended to stimulate further investment in productive assets. Approximately 8.8 million people are enrolled in DB pensions, often referred to as final salary schemes. A recent survey by the Pension Insurance Corporation (PIC) revealed that 60% of DB members fear these Government plans could jeopardise their retirement savings.
A previous government consultation on the plans admitted: “Any extraction of surplus will reduce security for members.” Tracy Blackwell, CEO of PIC, called for ministers to canvass DB members’ views. She said: “We think the views of DB members, many of them elderly, many of them classified as vulnerable, should be properly considered in any decision about a policy that the Government’s own document says would reduce the security of their pensions.
“So far, their voices have been entirely absent in this debate.” She encouraged concerned pension scheme members to raise the issue with their MPs. Andrew Tully, technical service director at Nucleus Financial, told The Telegraph that some employers might use these funds to counterbalance their increasing costs due to the rise in employers National Insurance from April.
He said: “The key is that there needs to be safeguards in place to ensure the security of members’ benefits. Without any surplus which is withdrawn, a scheme must still be able to cope with unforeseen events that could affect its ability to pay pensions.”
The Government highlighted the importance of protecting member benefits during pension reforms in the consultation, stating: “Past experience of sponsoring employer ‘contribution holidays’ has shown that the security of member benefits should be paramount in any major reform of the pensions landscape. We are clear that changes to the surplus sharing regime should be made only where they are safe from a member benefit perspective. “.
The Department for Work and Pensions (DWP) has been asked for comment. Meanwhile, pensioners may want to note the increase in state pension rates taking effect this month.
State pension payments are set to rise by 4.1% with the full new state pension going from £221.20 a week to £230.25 a week. The full basic amount will see an increase from £169.50 a week to £176.45 a week.
Those considering contributing to National Insurance to boost their state pension may want to act now. Currently, individuals can make top-ups as far as the 2006/2007 tax year, while the usual limit is up to six years ago.
However, this opportunity to top up over an extended period is only available until the end of this tax year, after which the policy will revert to the standard six-year window.
