UK - Phased retirement will be an "administrative nightmare" for schemes, consultants warn.
The pensions Green Paper revealed that the government plans to scrap tax rules which prevent people drawing an occupational pension and continuing to work for the same employer.
Aon Consulting investment principal Chris Erwin said: “This is very much welcomed by people but it is a total administrative nightmare because you are not just managing one account, you are effectively managing a series of accounts.
“You have to manage people in two dimensions instead of one.”
He explained that a member might start receiving a fifth of his or her pension entitlement, while still accruing towards the other four-fifths.
Mercer Human Resource Consulting European partner Barry Mack agreed: “Essentially, you end up paying for a deferred member and an active member, in relation to what is actually one person.
“It extends the amount of record-keeping schemes have got to do, because obviously they have got to record part of the pension, and then there is still pension left to take.”
Hewitt Bacon & Woodrow believes software providers would be among the biggest beneficiaries of phased-in retirement.
Pensions business manager Jonathan Papier said schemes would have to upgrade their systems to cope with the increasingly complex administration.
He added: “This is begging for a computer solution to set up special records. Systems will have to be improved and enhanced, and 2004 is not a long time off to do that.”
However, NAPF benefits director David Astley believes that in spite of these extra costs and admin, schemes would be better off overall under the Green Paper proposals.
He said: “Cost savings from simplification of the tax regime will offset any minor implications from schemes adopting flexible retirement arrangements.”
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