briefing9

Get To Know Your Pension
A guide to new developments in pensions

Pension Entitlements from the state

Basic State Pension
If you earn more than the lower earnings limit (£75 per week 2002/3) you will start to earn state pension benefits. To qualify for a full state pension you must have contrinuted to National Insurance for around 90% of your working life, which currently is 44 years for men and 39 years for women, but this will equalise in future years.

You can also claim contribution credits for periods of time away from work for looking after children or other relatives (home responsibilities protection) or whilst claiming job seekers allowance, invalid care allowance, incapacity benefit or severe disablement allowance. Men aged betyween 60 and 65 are automatically credited with earnings, unless they are still in work.

Forthcoming Changes to State Pensions

From April 2002, the Government plans to replace SERPS with the new State Second Pension (S2P). As with SERPS it will be paid for through National Insurance and initially it will be related to esrnings. However, this will change to a flat rate in around 5 years time.

S2P focuses on the low paid and low earners will get a boost from S2P. People who earn less than £10,000 a year will have their pension calculated as if they have earned £10,000 a year, thus offering a real chance of a better pension than SERPS for the low paid.

S2P also provides pension credits for those looking after adults with a long term illness or disability and also pre-school children fro April 2002. For these years out of employment the carers will be treated as if they earned £9,600 (2001 figure) per year even though they actually earned nothing. The figure will be subject to annual change. It will also be possible to contract out of S2P as it is currently possible to contract out of SERPS if you are a member of an occupational pension scheme or have a personal pension.

State Pension Forecast
You can get a forecast of what your basic state pension and SERPS will be. The forecast also includes any graduated pension you may be entitled to. You will need to get form BR19 from your local social security office and return it to the Retirement Pension and Advice Unit in ewcastle, the address is on the form. You can aslo complete the form online at www.dss.gov.uk. You can also download the form fromm the internet.

State Earnings Related Pension (SERPS)
If you work for an employer who does not have an occupational pension scvheme and you are not a member of a personal pension scheme you are likely to be entitle to SERPS.

SERPS was introduced in 1978 with the aim of provideing a pension at retirement based on average earnings before retirement. The latest DSS figures show that the average pension for men entitled to SERPS is just under £20 per week and for women the figure is around £8. This is due to women earning less than men and being more likely to take breaks from paid employment.

Graduated Pension
This was the form of earnings related pension that preceded SERPS and if you were employed between 1961 and 1975 you may be entitled to graduated pension.

State Pension Age
Currently the retirement age for men is 65 and for women is 60, but this is due to change and the ages be equalised to 65. Women borm before 6 April 1950 will reture at 60, women born after 5 March 1955 will reture at 65 and women born in-between these dates will be covered by transitional arrangenents. The DSS leaflet PM6, Pensions for Women - Your Guide, gives full details on this.

Stakeholder Pensions

Stakeholder pensions are aimed at providing and extra pension option for the millions of workers who do not have access to an occupational pension scheme and for those memnbers of occupational schemes who earn less than £30,000 a year and who want to make additional voluntary contributions.

Low-paid workers are far more likely to work in areas where there are no occupational schemes, so they are less likely to have any provision other than that provided by the state. The Government wanted to address this fact and also that personal pensions did prove to be a viable alternative to those on low pay or those with irregular earnings.

Stakeholder pensions will have low costs and will be flexible. Contributors can pay up to £3,600 per year into the scheme whether working or not, or more subject to age and earnings.

How do Stakeholder Pensions Work?

Stakeholder pensions are what are known as money purchase schemes or defined contribution pensions. This means that the pension on retirement is depenedent on the amount of contributions made and the investment returns over the life of the scheme.

Stakeholder pensions must meet certain legal conditions:

- They must provide a pension and a lump sum on retirement (of up to 25% of members fund).

- Benefits can be taken from any age between 50 and 75.

- Statring contributions can be from £20 per month on a regular or irregular basis.

- Members must be able to more their pension from one scheme to another without charge and scheme charges cannot be more than 1% of the fund value per annum.

The schemes must be run by trustees or by managers authorised by the Financial Services Authority and they must supply an annual statement of contributions to members which also includes the transfer value of the fund, should the contributor want to transfer arrangements. Other basic information must be supplied rewgarding conditions of membership, investment policy and conditions governing transfers to other pension arrangements and annuities.

What Do Emploers Have To Do?

By October 2001 most employers will have to provide access to a stakeholder pension scheme. They will not have to contribute to the scheme but will have to act as administrator for it, by collecting contributions and passing it on to the stakeholder provider.

This is a requirement for all employers with 5 or more employees and they are only exempt if they:

- Offer an occupational pension scheme that all employers can join within a year of starting work or

- Pay at least 3% of their employees basic pay into a group personal pension which is available to all employees who should have access to a stakeholder scheme.

Employers must choose a scheme from the register maintained by OPRA which is responsible for monitoring stakeholder schemes and they also have to consult with employees and trade unions about this choice. There areno set ways in which this consultation should occur.

After consultation the employer has to formally designate the scheme and has to provide emplyees with details about it. The employer will then have to arrange payroll deductions for joiners. No employee is compelled to join the scheme, but it would be advantageous if the employer also contributes.


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		A service from The General Federation of Trade Unions Central House Upper Woburn Place London WC1H OHY