At the same time it issued the Green Paper 'A New Contract for Welfare: Partnership in Pensions' in ...
At the same time it issued the Green Paper 'A New Contract for Welfare: Partnership in Pensions' in December 1998, the Government issued a consultation document 'Strengthening the Pensions Framework'.
Almost exactly a year later, it published the Child Support, Pensions and Social Security Bill which takes forward many of the proposals in the consultation document. Other measures in the consultation document will be tackled during 2000 in sets of regulations. The Bill also provides for the reform of Serps by way of the State Second Pension (S2P).
While the Bill does not contain provisions to enable schemes to convert Guaranteed Minimum Pensions (GMPs) to an actuarial equivalent, work has not stopped on this.
Once the Government has finalised its policy on future contracting-out arrangements to reflect the introduction of the S2P options for GMP conversion will be looked at again.
As there was limited support for salary-related rights in a money purchase scheme, this proposal has been dropped.
Therefore, where there is a management buy-out, and a new contracted-in scheme is established, the problem of how to preserve past service contracted-out rights will remain.
There is no mention of whether it will now be possible to transfer contracted-out rights into a Section 53 scheme. Nor is there a mention as to whether equivalent pension benefits should now be commutable prior to state pension age.
The Bill contains provisions allowing commutation of protected rights in contracted-out money purchase schemes in cases of serious ill health. Where the member is married, no more than half the member's protected rights may be paid as a lump sum.
However, there are no provisions allowing GMPs to be commuted in cases of serious ill-health. Section 9(2B) rights (rights in a contracted-out salary related scheme accrued after 5 April 1997) can already be commuted in such cases.
The Government's proposals concerning anti-franking have altered since the consultation paper. Instead of amending the existing anti-franking rules, the Bill replaces the legislation with a new minimum benefits test.
There is no mention of any provisions to remove or clarify certain conditions for contracting-out or to streamline the notice procedures for decisions to contract-out. There is also no mention of cutting off applications for incentive payments.
Many of the technical changes to the Pension Schemes Act 1993 are already contained in the Welfare Reform and Pensions Act, which was enacted in November 1999. In addition, the Bill will change the method of calculating contribution equivalent premiums to reflect the way rebates are now calculated.
This is the section that deals with the removal of unnecessary regulation. There is no mention of exempting such small self-administered schemes where the employer is sole trustee and all the members are controlling directors from certain requirements of the Pensions Act to bring them into line with SSASs.
The Bill enables regulations to be made permitting ear-marked money purchase schemes to obtain their annual statement confirming that contributions have been paid according to the payment schedule from the insurance company. This would then save the scheme from appointing a scheme auditor.
It remains to be seen whether insurance companies will be able or willing to provide the annual statement, as many have no systems to monitor payment schedules. However, it is likely that any enabling regulations will also impose a duty on the trustees to provide the insurance company with sufficient information to enable it to make the statement. If the insurance company does agree to provide the statement, it will be subject to sanctions if it does not report to Opra any contributions paid late during the scheme year.
There is no mention of exempting schemes where all the benefits are secured with guaranteed insurance annuities from certain provisions of the Pensions Act.
Nor mention of exempting such schemes from having to produce a payment schedule.
There was no support for the proposal to permit trustees of industry-wide schemes to set up personal pension schemes for members who become self-employed or join a non-participating employer. This proposal has therefore been dropped.
The Government plans to enhance the role of the Occupational Pensions Regulatory Authority (Opra).
Powers for Opra to apply civil, rather than criminal, sanctions are contained in the Welfare Reform and Pensions Act and in draft regulations issued in November.
Opra expects this power to be particularly useful in cases of late payment of contributions. Because of the cumbersome procedures, and a six month time limit for laying information before the court, there have been few successful criminal prosecutions.
Reports of late payment of contributions (including AVCs) must still be made to Opra within 30 days of the due date. However, delays of no more than 10 days do not have to be reported as long as there have not already been two late payments in the past 12 months.
Opra has recently agreed a streamlined process for dealing with such reports as it expects higher volumes of cases (and therefore sanctions) in the future.
The new civil sanctions will also apply to late audited accounts and failure to provide information to the registrar which both currently have criminal sanctions. Late payment of contributions will remain a criminal offence in cases of fraud.
There is no specific power for Opra to require schemes to provide information in a format that Opra can decide. However, the Bill requires certain information to be given to Opra where schemes are winding-up. Opra is already required to keep a register of those it has disqualified from being pension scheme trustees.
The Bill requires Opra to make the register available to inspection in person by the public
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