Summary
18.The legislation creates a new state pension for people reaching pensionable age on or after implementation on 6 April 2016. A person entitled to the full state pension will be paid a single weekly rate to be set out in regulations. This replaces the existing state pension, which has two components: a basic pension and an additional pension. The Act contains special provisions for people who have made National Insurance contributions before implementation to ensure that all their National Insurance contributions are taken into account (subject to a minimum qualifying years requirement).
19.The Act makes provision for a number of changes resulting from the introduction of the new state pension. These include 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 who reach pensionable age on or after the introduction of the new state pension.
20.The Act also makes provision for a new class of voluntary National Insurance contribution, Class 3A, to allow current pensioners and those who reach pensionable age before 6 April 2016 to increase their additional pension.
21.The Act also amends the timetable for increasing pensionable age from 66 to 67 that was originally set out in the PA 2007, bringing it forward by eight years to begin in 2026 and end in 2028.
22.The Act includes measures to introduce a framework of periodic reviews to consider whether the pensionable age should be changed. The reviews will be informed by reports from the Government Actuary’s Department about life expectancy and from an appointed person or persons on wider factors. These wider factors will be specified by the Secretary of State at the time.
23.In addition, the Act contains measures to reform benefits for bereavement by introducing a new bereavement support payment. This will replace the existing range of benefits for persons whose spouse or civil partner dies on or after the date it is introduced. The new benefit will provide support for the period immediately following bereavement.
24.The Act contains provision to abolish the assessed income period (AIP) in state pension credit claims from April 2016. The removal of the AIP will apply to new customers and there is a power to apply it to existing customers with a 5-year AIP already in place at April 2016 (the latter will be gradually phased out in the first few years).
25.The Act contains a duty for the Secretary of State 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. There is also a separate provision for the withdrawal 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.
26.There is provision in the Act to regulate to ban the practice of providing incentives to encourage individuals to transfer a cash equivalent value of their accrued rights from a salary-related occupational pension scheme to an alternative arrangement.
27.The Act also contains a number of measures relating to private pension legislation, including powers for the Secretary of State to restrict charges and set minimum quality standards for pension schemes and amendments to the PA 2008 relating to automatic enrolment. There are also technical amendments to the PA 1995 and the PA 2004 which are designed to improve operational processes for the Pensions Regulator.
28.Provision is also included for a new statutory objective for the Pensions Regulator which would require it to minimise any adverse impact on the sustainable growth of sponsoring employers when exercising its functions relating to scheme funding.
29.Finally the Act includes measures to introduce into the Pension Protection Fund (PPF) an increased compensation cap for those with a significant length of pensionable service.