Pensions News: Spring 2011

June 13th, 2011 by JCB
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The Secretariat

On 31 March 2011, Richard Williamson, Boston pilot, stepped down as Deputy Chairman of the P.N.P.F. and Joe Wilson, Tees pilot, will be replacing him in this role.  Richard will continue in his role as a Trustee Director until his retirement from pilotage later this year.

Independent Trustee/Chairman

At the end of March 2011 the Chairman’s, Heather McGuire, consultancy contract was terminated by Associated British Ports.  In order to retain Heather on the Board, the trustees resolved to amend the Company’s articles of association to allow the appointment of an independent trustee/chairman.  At an Extraordinary General Meeting held on 24 March 2011 the shareholders of the P.N.P.F. Trust Company limited unanimously adopted the trustees’ proposal and Heather McGuire was appointed to the role of independent professional trustee and chairman with effect from 1 April 2011.

Rule Changes

At their February 2011 quarterly meeting the trustees agreed to adopt a new Rule 9(4) which authorises the trustees to seek information from the Participating Bodies to assist in the formulation of a recovery plan when the results of the 2010 annual valuation are finalised.

Retail Price Index/Consumer Price Index (RPI/CPI)

The government has implemented legislation that changes the index used for statutory pension increases from RPI to CPI.  Although this will not affect increases awarded to pensions in payment it does affect increases awarded to deferred pensions from 2011.

Annual Allowance

From 6 April 2011 the government has substantially reduced the annual allowance (the amount you can build up in a pension scheme without paying tax on it).  It has been reduced from £255,000 to £50,000.  This allowance applies to benefits earned under all registered pension schemes.  To administer the new requirements the trustees have decided to set up a uniform Pensions Input Period (PIP), which will run from 6 April to 5 April.  This will have an impact on the annual benefit statements you will receive from 2012.  The benefit statement will include a figure for the annual gross pension accrued to 5 April, as well as the amount of annual allowance used during the PIP.  This information should help you complete your tax returns.

Legal Proceedings

Justice Warren presided over the hearing. during January and February 2010 and a judgment was handed down on 28 June 2010.  Various parties have now commenced appeals on certain issues and the hearing of these appeals is due to commence on 16 May for 5 days.  All through the course of these proceedings and subsequent appeals the trustees have kept the Pensions Regulator informed.

2010 Benefit Statements

We are currently in the process of running off the 2010 benefit statements and these will still be in the old format, ie as at 31 December 2010.  The new format will take effect from 2012.  The 2010 statements should be sent out in the next week or two.

Budget 2011

On 23 March 2011 the Chancellor presented his budget for the year and listed below are what happened on the pensions from.

Contracting-out

For defined benefit (final salary) pension schemes contracting-out will be scrapped as part of the move to a single-tier state pension.  There are concerns within the industry that the abolition of contracting-out may lead to more employers closing their schemes to existing members.

State Pension Reform

The Chancellor confirmed that the government would implement a single-tier state pension.  The proposed system would still be flat-rate and would continue to be based on contributions.  The pension would be about £140 pw, but would not apply to people who retire before the reforms are implemented.

 

Merger of Income Tax and National Insurance

It was announced that the government would consult on the merger of income tax and national insurance contributions to make it “fit for the modern age.”  Pensioners will not pay more tax as a result of the merger.  Within the industry there are concerns that the merger will lead to an end to the current procedure for obtaining tax relief on contributions.

State Pension Age

The Chancellor confirmed that the government wants to put in place a more automatic method of increasing the state pension age based on regular reviews of longevity.  It will reach 66 in 2020 and 68 by 2048.

Pensions Tax Relief on Contributions

The Budget confirmed the move to reduce the annual allowance for tax-free pension contributions to £50,000 and confirmed the lifetime allowance would be reduced to £1.5m from the 2012/13 tax year.

Public Service Commission

The Treasury has backed Lord Hutton’s recommendations for public sector pension reform and the Chancellor confirmed there would be no “cherry picking” of his proposals.  He said there should be similar changes to the pensions of MPs.  Lord Hutton recommended the phasing out of final salary schemes in favour of cheaper career average schemes by 2015.

 

Debbie Marten

debbie@pnpf.co.uk

 

RETIREMENTS

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