Overview of the Structure of the Act
30.The Act is in seven parts:
Part 1 – State pension
31.This Part of the Act contains provisions to reform the state pension system and introduce a new state pension. It replaces the current two-component system with a single-component flat-rate pension. It includes transitional provisions for:
people who have paid, been treated as having paid or been credited with National Insurance contributions in respect of tax years before the introduction of the new state pension;
inheriting entitlement from a late spouse or civil partner who had made National Insurance contributions in respect of tax years before the introduction of the new state pension;
women who, before 1977, elected to pay a reduced rate of National Insurance contributions; and
sharing certain state pension entitlement with a former spouse or civil partner upon divorce or dissolution of a civil partnership.
32.Provisions are made to allow people to postpone or suspend their entitlement to a state pension. It also contains provisions for a number of changes arising from the introduction of the new state pension, including the abolition of contracting-out for salary-related occupational pension schemes and the abolition of the savings credit element of state pension credit for those people who reach pensionable age on or after the introduction of the new state pension.
Part 2 – Option to boost old retirement pensions
33.This Part creates a new class of voluntary National Insurance contribution, Class 3A, for pensioners and people due to reach pensionable age before 6 April 2016. Payment of Class 3A contributions would entitle a person to one or more units of additional pension.
Part 3 – Pensionable age
34.This Part contains two measures relating to pensionable age. The first amends the PA 1995 to begin the increase of pensionable age from 66 to 67 eight years earlier. The increase will begin in 2026 and end in 2028.
35.The second measure provides for periodic reviews of pensionable age and for these reviews to be informed by reports in relation to life expectancy from the Government Actuary’s Department, and from an appointed person or persons on other relevant factors specified by the Secretary of State at the time.
Part 4 – State pension credit
36.This Part contains two measures relating to the assessed income period (AIP) in state pension credit claims. The AIP is a feature of state pension credit that removes the requirement for certain individuals to notify the Department for Work and Pensions of changes to their retirement provision (broadly defined as capital, annuities and non-state pensions) for a defined period, for the purposes of assessing their entitlement to state pension credit.
37.The first measure provides for the phasing out of the AIP in state pension credit cases from April 2016.
38.The second measure repeals existing legislation in the PA 2008 to ensure that indefinite AIPs set before 6 April 2014 will continue beyond that date.
Part 5 – Bereavement support payment
39.This Part of the Act contains provisions to reform bereavement benefits and introduce a new bereavement support payment.
Part 6 – Private pensions
40.This Part contains a number of measures related to private pension legislation, 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;
a provision for regulations to be made banning the practice of providing incentives which encourage individuals to transfer a cash equivalent value of their accrued rights from a salary-related occupational scheme to an alternative arrangement;
the removal of the existing power to make refunds of contributions (“short service refunds”) to members of money purchase occupational pension schemes who terminate their membership before two years have elapsed since they joined the scheme;
a provision for regulations to be made to restrict charges in and impose governance and administration requirements on schemes specified in regulations;
a provision for regulations and Financial Conduct Authority rules to be made requiring the disclosure and publication of information relating to transaction costs for money purchase pension schemes;
amendments to the PA 2008 relating to automatic enrolment, including a power to specify certain groups that employers will not be required to enrol or re-enrol;
amendments to the PSA 1993 regarding the payment of a limited amount of unpaid pension contributions from the National Insurance Fund where an employer becomes insolvent so that all those who may become members of a pension scheme as a result of the workplace pension reforms are entitled to this protection;
a power to require pension levies to be paid in respect of past periods;
various technical amendments to the PA 1995 and the PA 2004 designed to improve operational processes for the Pensions Regulator;
an amendment to companies legislation to make it clear that the body preparing guidance in relation to pensions illustrations may benefit from the exemption from liability for damages;
a new objective for the Pensions Regulator to minimise any adverse impact on the sustainable growth of an employer when exercising its functions under Part 3 of the PA 2004; and
an increase to the Pension Protection Fund compensation cap to reflect long service.
Part 7 – Final provisions
41.These sections relate to the power to make consequential amendments, general provision in respect of regulations and orders under the Act, the Territorial Extent of the Act, the commencement of provisions in the Act and the short title of the Act.
