Employer-sponsored pension schemes will be required to undergo significant changes as a consequence of the Finance Act 2004. However, the Pensions Act heralds further change, and all of these must be accommodated in schemes run on behalf of employers.
Retirement ages are undoubtedly going to rise to give the majority of people a chance to build up sufficient financial reserves on which to retire. After all, we're all apparently going to live to a ripe old age.
The state retirement age for men and women is gradually being equalised, and women born after April 1955 will be unable to take their state pension before their 65th birthday.
Additionally, from 2010, people will be unable to draw privately-funded pension benefits before the age of 55.
However, from April 2006, an individual will not have to retire to draw pension benefits, which will make it easier for people to extend their working life through working part-time.
The Age Discrimination Act, which will be enacted from October 2006, also forbids age discrimination and prevents employers imposing compulsory retirement ages, although a default retirement age of 65 will be set.
Contributions and protection
Currently, the sponsoring company must make contributions to the pension scheme by the 19th day of the month, after the month to which they relate. If this deadline is missed, the Occupational Pensions Regulatory Authority (Opra) must be informed. Opra will be replaced by the Pensions Regulator from 6 April.
However, new rules are less stringent, so a one-off late payment will not have to be reported, whereas regular or deliberate late payments will. Trustees should notify members if a contribution is more than 60 days late and Opra should be advised if a payment is more than 90 days late.
A pension protection fund will be introduced to help safeguard the pensions of members of final salary schemes in the event their employer goes into receivership while the scheme is in deficit. Such a fund will be financed by a levy on final salary schemes. Any scheme with apparent funding difficulties will be considered high risk and will have to pay a higher levy. Not surprisingly, they would also come under scrutiny from the regulator.
In future all employers will be bound by the member nominated trustee process, which requires that at least one-third of the scheme's trustees be chosen by members. Further, by 2008-09, there is likely to