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The introduction of a new flat-rate State Pension will start a year earlier, in April 2016.
Joanne Segars, Chief Executive, NAPF, said: “We strongly welcome proposals for a new, single tier state pension. But the Government has to ensure that the changes are implemented in a way that does not damage company pension schemes. This is a very tight timeframe and we question whether it can be delivered. Schemes need flexibility and time to adapt. If the Government gets it wrong then it risks sparking a fresh round of final salary pension closures in the private sector. Businesses that get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and this extra cost may prompt them to close their pensions altogether. “We have waited many years for these reforms. An overhaul of the state pension is long overdue and a simpler, fairer system helps set a clear foundation on which people can build their own savings. It would be a shame if mistakes were made in a rush to implement the changes.”
The Pensions Regulator will be set a new objective to support pension scheme funding arrangements that are compatible with sustainable growth for the sponsoring employer. Joanne Segars said: “We have long been calling for a new statutory objective for the Pensions Regulator to help secure the future of pensions, so we are pleased with today’s announcement. We back the broader focus of the objective and look forward to seeing more detail. The new objective needs to strike the right balance between protecting savers’ interests, helping good defined benefit pensions remain open, and ensuring pension regulation does not hinder investment and growth. We will be keeping a close eye on how the Regulator meets this new goal.”
Ms Segars added: “The requirement for the Regulator to allow use of the full flexibility in the current funding regime is a sensible approach and is in line with what pension funds want. This should give businesses running final salary pensions some much-needed relief from the effects of low gilt yields and quantitative easing.”