The Pensions Act 1995
c. 26
is a piece of

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

legislation Legislation is the process or result of enrolling, enacting, or promulgating laws by a legislature, parliament, or analogous governing body. Before an item of legislation becomes law it may be known as a bill, and may be broadly referred ...

to improve the running of

pension A pension (; ) is a fund into which amounts are paid regularly during an individual's working career, and from which periodic payments are made to support the person's retirement from work. A pension may be either a " defined benefit plan", wh ...

schemes.

Background

Following the death of

Robert Maxwell Ian Robert Maxwell (born Ján Ludvík Hyman Binyamin Hoch; 10 June 1923 – 5 November 1991) was a Czechoslovakia, Czechoslovak-born British media proprietor, politician and fraudster. After escaping the German occupation of Czechoslovakia, ...

, it became clear that he had embezzled a large amount of money from the pension fund of Mirror Group Newspapers. As a result of this, a review was established to look into ways that the running of pension schemes could be improved. The end result was the Pensions Act 1995.

Overview

The main features of the Act included: * The establishment of the Occupational Pensions Regulatory Authority * The Minimum Funding Requirement (MFR) to ensure that all pension schemes had a minimum amount of money * A compensation fund for pension schemes in the event of fraud * Protection for existing pension scheme benefits so that they could not be reduced in the future without member consent * A requirement for pension schemes to have member nominated trustees * Greater disclosure of information to members * The introduction of clear documentation showing what should be paid into a scheme, and monitoring of those contributions * A minimum rate of increase to apply once in payment to pension earned after the date on which the Act came into force Many of the features introduced by the Act were abolished or amended by the

Pensions Act 2004 The Pensions Act 2004 (c. 35) is an Act of the Parliament of the United Kingdom to improve the running of pension schemes. Background In the years following the introduction of the Pensions Act 1995, it was widely perceived that it was failing ...

. The MFR was heavily criticised in the Myners Report (2001), which was a HM Treasury sponsored report into institutional investment in the UK. The Myners Report identified three problems with the MFR: * For some pension funds, the level of assets under the MFR was insufficient to provide the benefits promised by the scheme * Regulatory costs for sponsoring firms increased without any reduction in the risks of fund insolvency * Sponsoring firms focused on meeting the narrow requirements of the MFR, rather than on ensuring that the scheme was appropriately funded. The Pensions Act 2004 replaced the MFR from September 2005 with a new scheme-specific "statutory funding objective" (SFO), allowing more flexibility to individual schemes' circumstances whilst at the same time protecting members' benefits. The Act established the Pension Regulator with the power to require sponsoring companies to fully fund their pension liabilities, by adopting an appropriate recovery strategy consistent with the SFO. Liu and Tonks (2012)Liu, W. and I. Tonks (2012) ''Pension Funding Constraints and Corporate Expenditures'', Oxford Bulletin of Economics and Statistics, 2012. DOI: 10.1111/j.1468-0084.2012.00693.x examine the effect of a company's pension commitments on its dividend and investment policies, assessing the impact of funding rules under the MFR, and also under the funding requirements introduced under the Pensions Act 2004. They find a strong negative relationship between a firm's dividend payments and its pension contributions, but a weaker effect on investments. They found that dividend and investment sensitivities to pension contributions were more pronounced after the introduction of the Pensions Act 2004.

State pensions

The Act also affects state pension

A significant change was the phasing in of equalisation of state pension ages for men and women over a ten-year period.

Notes

References

* R Goode, ''Pension Law Reform'' (HMSO 1993) Cmnd 2342 *E McGaughey, ''A Casebook on Labour Law''
Hart 2019
ch 6(4)

External links

{{Authority control Pensions in the United Kingdom United Kingdom Acts of Parliament 1995