Mayer Brown's Reaction to: The Queen's Speech Proposal on Pensions
26 May 2010
26 May 2010 - Taken in the round, the new Government’s proposals on pensions seem to be a step in the right direction towards ensuring good quality pension provision continues, but only at this stage a small step.
The Government has promised action to simplify the mass of complex pension legislation, which is always welcome.
Employers will no longer be able to require employees to retire at 65. The writing was already on the wall for phasing out the default retirement age. Employers may find this difficult to deal with, specially if employees don’t feel they have sufficient pension savings to retire comfortably. The challenge for the employer is to develop HR systems that avoid the working life of all its employees ending badly.
The new Government has also promised to “explore the potential” to give people greater flexibility in accessing part of their pension savings early. This does seem to work in other countries and it might encourage some individuals to save more for their retirement, but it also undermines the provision of income in old age. We do not know what the conditions for access will be but it seems unlikely they will simplify life for existing schemes.
Anna Rogers, Head of Pensions Group at Mayer Brown said: “Everyone agrees with simplification but the brakes on it have not changed – a desire to make sure there are no losers (which is a good reason) and paranoia about how the industry will exploit any relaxation (a bad reason). If we can get meaningful simplification that really eases the regulatory burden, it will help existing schemes. But we doubt it will be enough on its own to achieve the stated aim of encouraging companies to offer high-quality pensions to all employees. Sorting out means-testing so that pension saving is worthwhile for low earners, and resolving the horrendous mess about high earners, would make more of a difference for the longer-term.”
For further information:
Senior PR & Marketing Manager, London
+44 20 3130 8547