Pensions Bill

The National Federation of Occupational Pensioners (NFOP) (PB 33)

 ABOUT THE NATIONAL FEDERATION OF OCCUPATIONAL PENSIONERS (NFOP)

1. The National Federation of Occupational Pensioners (N.F.O.P) is the oldest and largest occupational pensioner organisation in the UK, with 80,000 members nationwide organised into 185 branches.

2. As well as pensions, the NFOP lobbies and campaigns on a wide range of issues of concern to older people, including health, social care, transport and social inclusion, and works closely with other organisations that represent older people.

3. The Draft Pensions Bill provides for reforms to the State Pension system (the single-tier pension) which will affect new pensioners from 2017 at the earliest. As an organisation that represents only existing pensioners, our remarks on the Draft Bill will be largely limited to those areas of the legislation which impact upon existing pensioners.

4. NFOP is pleased that the DWP Select Committee will be undertaking pre-legislative scrutiny of the Draft Bill and welcomes the opportunity to comment on the Government’s proposals. We would be delighted to provide further evidence to the Committee if appropriate.

SUMMARY

5. NFOP broadly welcomes the provisions in the Pensions Bill for future pensioners, but recommends that a number of issues in the following areas are carefully examined by the Public Bill Committee:

· Part 1 (State Pension), Clause 2 (Entitlement to State Pension at full or reduced rate)

· Part 1 (State Pension), Clause 24 (Abolition of contracting-out for salary related schemes etc) – Also Schedule 13 Abolition of contracting-out for salary related schemes & Schedule 14 Power to amend schemes to reflect abolition of contracting-out

· Schedule 13 Abolition of contracting-out for salary related schemes

· Schedule 14 Power to amend schemes to reflect abolition of contracting-out

· Part 2 (Pensionable Age), Clause 26 (Periodic review of rules about pensionable age)

Part 1 (State Pension), Clause 2 – Entitlement to State Pension at full or reduced rate

6. Clause 2 of the Pensions Bill amends existing pension legislation to increase the qualifying period for a full state pension from 30 to 35 qualifying years.

7. NFOP are concerned about the transition arrangements that will be provided to those individuals who, despite not having reached state retirement age, will have made "life decisions" and chosen to leave paid employment in the knowledge that they currently qualify for a full state pension (having accrued 30+ qualifying years).

8. NFOP believes that provisions should be included in the Bill to ensure that all individuals with 30 qualifying years are advised of their projected pension under the revised scheme (30/35th of £144pw) and given the opportunity to "buy" additional qualifying years to enable them to maximise their state pension.

Part 1 (State Pension), Clause 24 - Abolition of contracting-out for salary related schemes etc.

9. Clause 24 of the Pensions Bill abolishes contracting-out under salary-related occupational pension schemes. This will result in such individuals paying more national insurance because there will no longer be a lower rate for people who were contracted-out. 

10. NFOP is concerned that the abolition of the contracted National Insurance Contributions (NICs) will force current members of occupational pension schemes, both private and public, to contribute more to their pensions to remain in those schemes. We are concerned that increased NICs in such schemes will force up the cost of personal contributions to these schemes, and may discouraging saving for future retirement.

11. Government must ensure that the end of contracting out is not taken by employers as an opportunity to justify the closure of Defined Benefit Schemes.

12. To facilitate and encourage savings, we believe that any change in the arrangement of pension schemes following the abolition of contracting out should encourage the employee to increase contributions to maintain their existing level of pension rather than be forced to accept a reduction of the benefit.

Part 2 (Pensionable Age), Clause 26 (Periodic review of rules about pensionable age)

13. Clause 26 of the Pensions Bill will require the Secretary of State to review whether the rules about pensionable age are appropriate, with regard to life expectancy and other relevant factors, in a report published every five years. These reviews will take into account analysis provided by the Government Actuary on increases required to the State Pension age in order to ensure individuals maintain a specified proportion of adult life in retirement.

14. Whilst NFOP welcomes the commitment to periodic reviews of the pensionable age, we are concerned that the Draft Bill as currently drafted does not explicitly reflect the statement made in Paragraph 153 of the Governments Pensions White Paper The Transition To The Single-Tier Pension that "Should a future Government decide to raise the State Pension age following a review, this Government believes that a ten year notice period will be sufficient notice for individuals affected to prepare for the change."

15. NFOP suggest s that provisions are made within the Pension Bill to ensure that individuals approaching retirement are given this ten year notice period, to ensure that there is adequate time for an individual to make the necessary adjustments in their financial planning.

WIDER POLICY IMPLICATIONS

Abolition of Pension Credit

16. A key corollary of the introduction of the new single tier state pension will be the abolition of Pension Credit. Whilst this simplification of pensions is to be welcomed, NFOP is concerned about how the pass-ported benefits that currently accompany a claim for Pension Credit (such as Housing Benefit and Council Tax Benefit) will be made available to recipients of the new single-tier pension.

17. NFOP are keen to ensure that this process is made clear to ensure that new pensioners do not lose out on the benefits of automatic pass-porting which currently exists in the pensions system.

18. With the abolition of Pension Credit from 2017 it is clear that over time the number of eligible individuals will reduce, delivering an administrative saving for the Government. Nevertheless, we believe that it is vitally important that the existing administrative provision for claiming Pension Credit is retained throughout the transition to the new system to ensure that current pensioners, whether they are already in receipt of Pension Credit or become eligible through a change in circumstances (for example if a spouse or civil partner dies) can obtain the necessary support they are entitled to.

July 2013