Background
3.The Pensions Act 2014 contains significant reforms to both the state pension system and bereavement benefits. It provides for a new class of voluntary National Insurance contribution, Class 3A, for existing pensioners and people due to reach pensionable age before 6 April 2016, amends the timetable for increasing pensionable age to 67 and introduces a framework for considering future increases in pensionable age. It also contains a number of measures relating to private pensions, including a power to provide for a system of automatic transfers of a person’s accrued rights to benefits under a pension scheme to another scheme of which that person is an active member and powers to restrict charges and set minimum standards for pension schemes.
4.For ease of reference, please note the following abbreviations for existing pieces of legislation used in these notes:
SSCBA 1992 – Social Security Contributions and Benefits Act 1992
SSAA 1992 – Social Security Administration Act 1992
PSA 1993 – Pension Schemes Act 1993
PA 1995 – Pensions Act 1995
SPCA 2002 – State Pension Credit Act 2002
PA 2004 – Pensions Act 2004
PA 2007 – Pensions Act 2007
PA 2008 – Pensions Act 2008
PA 2011 – Pensions Act 2011
State pension reform
5.In April 2011, the Government published a Green Paper, A state pension for the 21st century (Cm 8053), which consulted on two broad options for reforming the state pension system for future pensioners. The White Paper which followed in January 2013, The single-tier pension: a simple foundation for saving (Cm 8528), outlined the Government intentions for reforming the state pension. Those proposals form the basis for the measures in Part 1 of the Act.
Option to boost old retirement pensions
6.In the Autumn Statement of 5 December 2013 the Chancellor of the Exchequer announced proposals to bring forward measures for a new class of voluntary National Insurance contribution (Class 3A) which would allow pensioners to increase their additional pension. Provisions relating to the payment of Class 3A contributions and ensuing entitlement to units of additional pension are contained in Part 2 of the Act.
Pensionable age
7.The PA 1995 legislated to equalise women’s pensionable age with that of men between 2010 and 2020 by gradually increasing women’s pensionable age from 60 to 65
8.The PA 2007 then made provision to increase the pensionable age for all to 66 between 2024 and 2026, to 67 between 2034 and 2036 and to 68 between 2044 and 2046.
9.The PA 2011 accelerated the rate at which women’s pensionable age equalised with men’s, such that this process will complete in 2018. It also brought forward the period in which pensionable age would increase from 65 to 66 to between 2018 and 2020. This reflected increases in life expectancy at pensionable age since the original timetable to increase pensionable age was set in 2007. On 29 November 2011, the Chancellor of the Exchequer announced the Government’s intention to legislate to bring forward the increase to 67.
10.In addition to consulting on reform of the state pension, A state pension for the 21st century also sought views on options for managing future increases to pensionable age in response to ongoing increases in life expectancy projections. Following this, The single-tier pension: a simple foundation for saving, published in January 2013, set out a proposed framework for considering future increases in pensionable age.
11.Part 3 of the Act contains provisions for these changes to pensionable age.
State pension credit
12.The abolition of the assessed income period (AIP) in state pension credit cases from April 2016 was announced in the 2013 Spending Round. Part 4 of the Act contains measures providing for the end of AIPs.
Bereavement benefits
13.A public consultation was undertaken regarding bereavement benefits with the publication of Bereavement Benefit for the 21st Century (Cm 8221) in December 2011. The Government published its response to the consultation in July 2012 and this outlined how the range of benefits paid on bereavement would be reformed. Those proposals form the basis for the measures in Part 5 of the Act.
Automatic transfers
14.On 15 December 2011, the Government published a consultation on options for consolidating small pension pots. It outlined high-level policy proposals in its response, published on 17 July 2012, and published further details of the proposals in Automatic transfers: consolidating pension savings (Cm 8605) which was published on 23 April 2013. Part 6 of the Act contains measures providing for a system of automatic transfers.
Charges and requirements in pension schemes
15.On 4 July 2013 the Government published Quality standards in workplace defined contribution pension schemes which sought evidence from the pensions industry on areas of governance standards that can influence the size of a person’s final pension pot. On 30 October 2013, the Government then published Better workplace pensions: a consultation on charging (Cm 8737) which sought views on a range of measures to address pension charges in defined contribution workplace pension schemes.
16.On 27 March 2014, the Government published Better workplace pensions: further measures for savers (Cm 8840) which set out the Government’s response to both the call for evidence and the consultation and detailed a range of measures to tackle pension charges and improve governance standards in order to protect employees in workplace defined contribution pension schemes. The paper also set out areas for further consultation in relation to transparency and governance of trust-based schemes. There is provision relating to charges and requirements in pension schemes in Part 6 of the Act.
Pensions Regulator’s objective
17.On 25 January 2013, the Government published Pensions and Growth: a call for evidence which sought evidence on whether to introduce a new statutory objective for the Pensions Regulator. The Government’s response was published on 7 May 2013. There is provision for a new objective for the Pensions Regulator in Part 6 of the Act.
