WORK AND PENSIONS SELECT COMMITTEE ISSUES REPORT
5 April 2013
The recent report on the Single –tier State Pension (STP) from the Work and Pensions Select Committee has criticised the government’s decision to bring forward the implementation date to April 2016. The report recognises the clarity and simplicity that the new system will eventually bring. The STP is intended to reduce reliance on means-tested benefits. Pension Credit will still be available but the Savings Credit element will be abolished, reducing the numbers of people eligible for means-tested benefits. However, one of the most significant changes the reform will bring is that contracting-out will also end. The report points out that when the pensions industry and employers had indicated that they were largely satisfied with their involvement in the development of the contracting –out provisions of the draft Bill, this was when they thought they had until 2017 to prepare for the changes. Bringing things forward by a year may well present them with a more significant challenge and it is vital, says the report, that the DWP continues to work closely with pension schemes and employers on the detailed arrangements for ending contracting-out. DWP plans mean that, for employers, the end of contracting-out will mean an increase in NICs paid for each contracted-out employee of 3.4% of relevant earnings. DWP acknowledges that employers are likely to want “to reduce the level to which they must fund their [pension] scheme by the same amount as the increased National Insurance contributions” when contracting-out ends, either by reducing future pension benefits or by increasing employee contribution rates to pension schemes, or a combination of both. However, some private sector employers are limited by their scheme rules in the extent to which they are able to modify scheme benefits and in many cases scheme rules can only be changed by the scheme trustees or with the trustees’ consent. As the changes are likely to be seen by trustees as detrimental to scheme members, they may not be willing to give their consent. Provisions in the draft Bill would give employers a statutory power to amend the terms of their workplace pension schemes to increase member contributions or to reduce future service benefits, without trustees’ consent if necessary.
MULTIPLE JOBS ALL PAYING BELOW THE LEL – NO LONGER A PROBLEM FOR THE SINGLE TIER PENSION
29 May 2013
Employees who have multiple low-paid jobs earning below the National Insurance (NI) threshold will now qualify for credits towards the new State Pension.
In a Press Release issued by the Department for Work & Pensions it has been confirmed that those with a job earning less than the Lower Earnings Limit (LEL) of £5,668, and who may have other similarly low-paid jobs, are currently excluded from the basic State Pension. They are not liable to pay NI contributions and unless they qualify for NI credits for another reason or make them up themselves, they miss out on their State Pension. It is proposed that this will change when Universal Credit is fully rolled out. Low-paid women in particular stand to gain credits towards the flat-rate State Pension as a result of the reforms.
Pensions Minister Steve Webb said:
CIPP Policy News Journal
16/04/2014, Page 465 of 519
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