Please find below a comment from Deborah Cooper, Partner at Mercer on the announcement that the simpler, flat-rate State Pension will be introduced in April 2016, not April 2017 as reiterated in the Budget on 20 March 2013:
“Our Global Pensions Index highlighted that the health of Britain’s pension system could be improved by raising the minimum pension for low-income pensioners and by increasing the coverage for employees in occupational pension schemes. The Government’s proposals, together with auto-enrolment, are intended to achieve this. An earlier launch will enable more people excluded from the current system to benefit from the change, but it is not without its own risks.”
“There are implications for employers with defined benefit (DB) schemes. There is now less time for them to take steps to manage the increased cost that will arise following the removal of contracting-out, when the main National Insurance rates for those currently contacted-out will rise by 3.4% for employers and by 1.4% for their employees. Some may need to redesign their DB schemes. Even those with defined contribution (DC) schemes may need to review their target benefits.”
”We’re also concerned about whether the Government can get the legislation right in such a short timeframe. The legislation applying to contracting-out and state benefits has become notoriously complex and some of it will continue in force even after the implementation date. Because of the tight timescale, the Government is now unlikely to try and simplify the remaining requirements, and there is a serious risk that rushed reform could cause unintended and largely unforeseen consequences for the schemes affected. Ending contracting-out is about more than just rebates. It affects a lot of schemes in different ways and simplification is desperately needed if the Government is to avoid making existing scheme setups unworkable. Let’s not forget these employers and trustees already have auto-enrolment on their plate, and with the added threat of GMP equalisation hanging over them too.”
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