THE government must change the Pensions Bill or risk undermining retirement savings for lower earners, four trade bodies warn.
The National Association of Pension Funds, the Association of British Insurers, Institute of Chartered Accountants in England and Wales and the Society of Pension Consultants said employers were likely to change the definition of pensionable pay used by their existing pension scheme to the new definition of qualifying earnings set out in the Bill.
The NAPF said this would mean lower earners would lose out as the first £5035 of earnings would be disregarded for pension purposes.NAPF chief executive Joanne Segars said: "All that is needed is a common sense change to the definition of qualifying earnings and we should see a good outcome for everyone."
The NAPF added that pension schemes could face paying between £25,000 and £100,000 in legal actuarial, communication and negotiation costs should the definition of qualifying earnings not be revised as a result of employers wanting to change scheme rules.
Segars added: "Ministers have underlined that they want the new Personal Accounts scheme to have a minimal impact on existing provision so we are hopeful that they will try to accommodate our concerns.
"Existing workplace pensions are generally of higher value than the new statutory minima to be introduced in 2012. Nothing should be done to undermine good provision."
Minister for pensions reform Mike O’Brien said: "We must minimise any disruption to current pension arrangements, which is why the qualifying test must be designed in as simple a way as possible.
"I have listened to stakeholders and remain open to reasonable suggestions about how the test may be applied.
"We must strike a balance - maximising new savers and saving, and supporting existing pension arrangements - that's the key objective."
The current Pensions Bill is due to be debated at the House of Lords tomorrow (June 17).
© Incisive Media Ltd. 2008
Incisive Media Limited, Haymarket House, 28-29 Haymarket, London SW1Y 4RX, is a company registered in the United Kingdom with company registration number 04038503
