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Occupational pensions in the UK: the current legal framework

Occupational pensions in the UK: the current legal framework. Institute for Employment Rights 10 March 2010. How did we get here?. What went wrong? “Explosive” growth in the period 1953-1967 3.1m increases to 8m The rise was affordable

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Occupational pensions in the UK: the current legal framework

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  1. Occupational pensions in the UK:the current legal framework Institute for Employment Rights 10 March 2010

  2. How did we get here?

  3. What went wrong? “Explosive” growth in the period 1953-1967 3.1m increases to 8m The rise was affordable High marginal tax and corporation tax made it attractive Income policies constrained pay but not pensions Favoured by trade unions But big gaps Early leavers Partners Women’s benefits Pension increases The Turner Commission

  4. “It is difficult to see private sector DB provision, certainly final salary in form, playing more than a minimal role in the future UK pension system” So go DC With a state pension scheme underpin The Turner solution

  5. The Turner target

  6. Preserve what we have got Manage the transition Get used to DC So where we are

  7. Statutory protection • Pensions Act 1995: Subsisting rights provisions • Preservation • Indexation • Discrimination • Contracting out • Superannuation Act 1972

  8. Rare Lloyds Bank Ricoh Astra Zeneca Privatised utilities Avoid by changing the contract of employment: South West Trains v Wightman Employer cannot risk triggering a section 75 debt Protection under the rules

  9. Cut benefits by changing the contract of employment Requires consent Unions in a potentially strong position Terminate and re-employ Potential claim for unfair dismissal What is the balance between the advantage to the employer and the disadvantage to the employees? Was the dismissal procedurally fair? Changing the contract

  10. Managing the transition • One scheme or two? • KPMG and Imperial Home Decor • Trust-based or contract-based? • Tax considerations • Monarch Airlines • Consultation requirements

  11. Dealing with DC • Control issues • Trustees or management committee? • PHI schemes – who controls the medical decisions? • Role of the provider • FSA regulation • Changing the provider

  12. An early warning system: ranging from the trivial to the serious Stringent timescales and penalties But on its own, calls for a file to be opened and no more The Regulator and the FSA

  13. Individual’s administration complaint: PAS and the ombudsmen Late payment: the Regulator Unit pricing error: the FSA Allocation of contributions: joint Poor investment performance: neither? TPR and FSA examples

  14. Regulator’s main concerns: Lack of member understanding Poor administrative practices Unduly high charges Poor decisions on retirement choices The need for a model constitution DC Governance

  15. Occupational pensions in the UK:the current legal framework Institute for Employment Rights 10 March 2010

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