Blog - Payroll Blog

A mixed bag for pension reform

21 Dec 2011

The past six months of pension reforms has been robust. Changes have represented a stall in markets, people living longer and companies being required to fund their pensions on a strict basis.

Firstly Workplace Pensions are rising in line with CPI rather than RPI. This will lead to lower increases in pensions in payment and will ease the pressure on the finances of pension funds that provide a defined benefit.

As the majority of people in defined benefit schemes are in the public sector, this will benefit public finances most.

On the other hand the Basic Age Pension, which will go up in line with Average Earnings, will go up faster than previously. This is good news for the poorest pensioners but will hurt the public finances.

Also almost everyone not in a workplace pension will be required to join a pension and will have to opt out in order to avoid making personal contributions.

As part of this change, the Government is introducing a new state organised pension called NEST, the benefits of NEST will not be guaranteed and will depend on the markets.

McEwan Wallace is currently running a free seminar for employers on NEST.

To add to the reforms already established, Steve Webb and Vince Cable have announced that the Government aim to increase the Basic State Pension by about 35 percent and make Second State Pension rules clearer.

For more information please contact Paul Bradshaw at McEwan Wallace Wealth Management on 0151 647 6682 or email enquiries@wallace.co.uk.