Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • March 2013
03

Faster move to single state pension 'could close final salary schemes'

Open-access content Monday 18th March 2013 — updated 5.13pm, Wednesday 29th April 2020

Plans to introduce a new single tier state pension a year earlier than planned in 2016 could accelerate the closure of final salary pension schemes in the private sector, industry experts have claimed.

2

Chancellor George Osborne announced yesterday that the introduction of the reforms would be brought forward from April 2017 to April 2016. He told the BBC's Andrew Marr Show that the flat-tier pension would be a 'huge boost for people who want to save for their retirement'.

However, Joanne Segars, chief executive of the National Association of Pension Funds, warned that the acceleration of the change set a 'very tight timeframe'.

She said: 'It would be a shame if big mistakes were made in a rush to implement the changes.'

In particular, Segars raised concerns over the impact that ending 'contracting out' of the second state pension would have on defined benefit pension schemes. Currently workers and their employers who have contracted out pay a lower rate of National Insurance than those who have decided to build a second state pension through the government.

'If the government gets it wrong then this runs the risk of sparking a fresh round of final salary pension closures in the private sector,' Segars said. 'Businesses who get caught on the wrong side of these changes will lose a significant rebate from the end of contracting out, and they will question whether they want to continue running these pensions. It is essential to give pension funds the flexibility and time to adapt and make the changes.'

Her sentiments were echoed by Malcolm McLean, consultant at actuaries Barnett Waddingham, who said: 'Both sponsors and members of defined benefit schemes will have to come to terms with the loss of their NI rebates in 2016 instead of 2017. A typical worker earning the average salary of £25,000 will pay an extra £270 a year with the employer having to stump up £657.

'This will inevitably put extra pressure in particular on those private sector employers who are currently struggling to support their pension arrangements and may be tempted to water down or, as a last straw, wind-up their schemes completely.'

McLean noted, however, that the earlier introduction would be good news for women who had faced another increase in the state pension age before the previous 2017 planned implementation date.

This was also highlighted by Tom McPhail, head of pensions research at consultancy Hargreaves Lansdown. 'This will be welcome news for the tens of thousands of women who would have missed out on the higher state pension as a result of reaching their state pension age just months before the introduction of the new terms,' he said.

Osborne also announced yesterday that the cap on the amount the elderly have to pay towards their social care costs, which was originally scheduled to be introduced in 2017 and set at £75,000, would now be brought in a year earlier and set at £72,000.

This article appeared in our March 2013 issue of The Actuary .
Click here to view this issue

You may also be interested in...

ta

Number of 'very old' people in England and Wales up 26%

The number of people aged 90 and over increased by 26% between 2002 and 2011, according to figures published yesterday by the Office for National Statistics.
Friday 22nd March 2013
Open-access content
2

Osborne rules out smoothing for pension scheme valuations

Chancellor George Osborne has used his Budget to rule out plans to allow pension schemes to smooth the value of their assets and liabilities over a number of years in funding valuations.
Wednesday 20th March 2013
Open-access content
2

DC pensions must be refined to produce good outcomes, says OECD

The UK is making good progress towards developing a sustainable defined contribution pension system but must do more to focus on providing adequate outcomes for savers, the Organisation for Economic Co-operation and Development said yesterday.
Wednesday 6th March 2013
Open-access content

Insurance firms 'need to do more to embed risk appetite'

The majority of insurance companies have defined the level of risk they are willing to accept but most are yet to apply these limits across all aspects of their business, Towers Watson said today.
Monday 18th March 2013
Open-access content
2

Webb confirms single state pension will be introduced in 2016

Introducing the single state pension a year earlier than planned will net the government an extra £5.5bn in National Insurance revenue and benefit 400,000 women who were hit by an increase in the pension age last year, pensions minister Steve Webb said today.
Tuesday 19th March 2013
Open-access content

Not shopping for an annuity 'could cost this year's retirees £237m'

Around 200,000 people buying an annuity this year could miss out on a combined retirement income in excess of £200m because of not shopping around for the best deal, MGM Advantage said yesterday.
Wednesday 13th March 2013
Open-access content

Latest from Health care

yf

Animal crossing: the threat of zoonotic diseases

Prachi Patkee and Adam Strange discuss what the rising threat of climate-driven communicable disease means for insurers
Wednesday 30th November 2022
Open-access content
hb

Boiling point: the effect of rising temperatures on future mortality

As quantifying climate risk exposure becomes increasingly important, Dan Gill, Rajinder Poonian and Alex Harding investigate the effect of rising temperatures on future mortality
Wednesday 2nd November 2022
Open-access content
vb

Interview: Professor Paul Dalziel on changing the focus of economies from growth to wellbeing

Paul Dalziel talks to Alex Martin about the true purpose of economics and the lessons we can draw from the 2019 New Zealand wellbeing budget
Wednesday 2nd November 2022
Open-access content

Latest from March 2013

2

MEPs warn IORP overhaul could 'jeopardise' pension investment

The European Commission has been urged not to introduce new capital requirements for pension schemes which could limit the investment potential of funds.
Monday 25th March 2013
Open-access content
ta

Asset strategies for life annuities under Solvency II

William Coatesworth and Eugene Dimitriou describe how life insurers are beginning to review their asset allocation in readiness for Solvency II
Monday 18th March 2013
Open-access content
2

Statistics: Football's £100m Game

Cameron Heath and Joe Ryan of Barnett Waddingham attempt to predict this season’s football results
Wednesday 13th March 2013
Open-access content

Latest from small_opening_image

2

COVID-19 forum for actuaries launched

A forum for actuaries has been launched to help the profession come together and learn how best to respond to the deadly coronavirus sweeping the world.
Wednesday 25th March 2020
Open-access content
2

Travel insurers expect record payouts this year

UK travel insurers expect to pay a record £275m to customers this year as coronavirus grounds flights across the world, the Association of British Insurers (ABI) has revealed.
Wednesday 25th March 2020
Open-access content
2

Grim economic forecasts made as countries lockdown

A sharp recession is imminent in the vast majority of developed and emerging economies as the deadly coronavirus forces businesses to shut down across the world.
Tuesday 24th March 2020
Open-access content

Latest from 03

2

MEPs warn IORP overhaul could 'jeopardise' pension investment

The European Commission has been urged not to introduce new capital requirements for pension schemes which could limit the investment potential of funds.
Monday 25th March 2013
Open-access content
2

Regulator maps out next steps for EU pensions overhaul

The head of the European pensions regulator has confirmed that further work will be needed to measure the impact of proposed changes to European Union workplace pensions legislation.
Tuesday 12th March 2013
Open-access content

Variable annuity sales reach record level

Sales of annuities which offer variable levels of payout depending on how they are invested reached a record £1.42bn in the UK last year, Towers Watson revealed today.
Tuesday 12th March 2013
Open-access content
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Manager - Building new team!

London (Central)
Up to £130k + Bonus
Reference
148845

Shape the Future of Credit Risk Model Development

Flexible / hybrid with 2 days p/w office-based
£ six figure salary with excellent bonus potential + package
Reference
148843

Longevity Director

Flexible / hybrid with 2 days p/w office-based
£ six figure salary with excellent bonus potential + package
Reference
148842
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ