Occupational pension schemes to suffer as cost of pension simplification is twice the price of the pension protection fund
New research from actuarial consultants Higham Group shows that UK occupational pension schemes will have to pay at least £300 million in order to comply with new tax rules, aimed at simplifying the pensions industry. This staggering figure, which dwarfs all previous estimates, is over twice the £150 million sum the Government hoped to raise this year (also from occupational pension schemes) to fund the Pension Protection Fund (PPF).
On top of this, the Government recently announced a code of practice about how trustees and companies should fund these same occupational pension schemes. This could cost an extra £50 million per annum in the future, potentially obliterating the hoped-for savings from tax simplification above.
Few schemes truly appreciate the scale of the task ahead, and many may not be able to implement the required changes before the 6 April 2006 deadline. This additional burden comes when many occupational pension schemes are reporting significant levels of under-funding. The PPF was, ironically, established to protect pension schemes following the collapse of a company, but now some schemes may even be unable to afford all the new changes and therefore be forced to consider winding-up their arrangements.