Pensions Act 2011 Receives Royal Assent

During November the Pensions Bill became the Pensions Act 2011. It brings into force several key changes. These include:

State Pension Age

The Act will accelerate the increase in the State Pension Age in two stages. The female state pension will rise to age 65 in 2018, and over the following two years both sexes State Pension Age will be raised to reach age 66 by 6 October 2020 (rather than 2026). The Government have said that the amendment will mean that the maximum delay before a woman receives her basic state pension will be reduced to 18 months.

In addition, the Chancellor in his Autumn statement on 29 November 2011, announced further plans to bring forward the increase in the State Pension Age from 66 to 67. The previous Government had legislated to increase the SPA from 66 to 67 between 2034 and 2036 whereas this is now scheduled to occur between April 2026 and April 2028.

Auto enrolment

The Pensions Act 2011 has made some amendments to the auto-enrolment requirements introduced under the Pensions Act 2008. These include:

raising the minimum level of earnings for an employee to be auto-enrolled into a pension scheme to £7,475 a year; the introduction of a 3 month grace period, during which the employer can defer enrolling an employee into a pension scheme; and a cap on the amount of administration charge that can be levied on active and deferred members of a qualifying scheme. These amendments are designed to introduce a degree of flexibility for employers however the general timetable for implementation of auto-enrolment remains the same. The 3 month grace period will help those employers who have a high turnover of seasonal or temporary staff.

In addition, the Pensions Minister Steve Webb announced on 28 November 2011 that small firms with 50 or less employees will have their staging dates for auto-enrolment put back at least a year, until after the next election in May 2015. Large firms with more than 3,000 employees will have no change, and will continue to start auto-enrolment between October 2012 and July 2013. Firms with between 50 and 3,000 employees will see smaller delays of up to one year.

Money Purchase Benefits

A new definition of "Money Purchase Benefit" was included in the Act at the last minute in response to...