UK - Members will be stripped of their additional voluntary con-tributions if their scheme is forced to claim from the Pension Protection Fund, First Actuarial warns.
Government amendments to the Pensions Bill will relegate AVCs down the priority order if the sponsoring employer claims from the PPF, effectively using it to repay the lost pensions of other members.
Currently, non-money purchase AVCs are held separately to other benefits in the priority order, ensuring individuals receive their payments back in full.
However, once the PPF is introduced in April, they will be lumped together with other scheme benefits, paying individuals up to a cap of £25,000.
First Actuarial director Alan Smith described the move as outrageous and warned that it would be particularly damaging for women, who often made AVCs because of family-related career breaks.
“You could have a ridiculous situation where a pensioner receiving a pension of £200,000 a year will continue to receive that in full, but someone less well paid, who made AVCs due to maternity leave, could lose all the extra money they put in,” he said.
“The government keeps saying people are not doing enough to save for retirement, but then it does things like this that provide a further disincentive to save.”
The Pensions Commission interim report found 69pc of women aged 65-69, who receive the basic state pension, get less than the full amount, compared with 15% of men.
However, in defending the move pensions minister Baro-ness Hollis said it would prevent “moral hazard” where schemes could be “manipulated to make it appear that benefits were derived from voluntary contributions”.
A department for work and pensions spokesman added: “Although we are aware of these concerns, people must remember that, for the first time, they will receive help through the PPF.”
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