Today the Government published a Pensions Bill emerging from consultation on the May 2006 White Paper Security in retirement: towards a new pensions system. The Bill is formed of four Parts containing twenty-nine clauses (for starters; Government amendments will doubtless extend this considerably), plus seven Schedules.

Part 1 - State Pension

Entitlement to Category A and B retirement pensions

A person reaching state pension age on or after 6 April 2010 will be entitled to a full basic state pension if they have paid or been credited with class 1, 2 or 3 National Insurance contributions for at least 30 "qualifying years" in their working life. (At present, a man has to have 44 years and a woman 39 years, and there is a 25% de minimis rule to qualify for any pension at all: that rule is being scrapped).

A spouse or civil partner of a person reaching SPA on or after 6 April 2010 (or of a person who dies on or after that date without having reached that age) may substitute or inherit a Category B pension based on that person's Category A pension where the contributor concerned satisfied that 30-year condition; even where the deceased did not claim a pension.

Credits for basic state pension

New crediting arrangements for carers replace Home Responsibilities Protection.

Abolition of adult dependency increases

Adult dependency increases are abolished from 6 April 2010.

Up-rating of basic state pension and other benefits

The earnings link to the basic state pension is guaranteed to be restored no later than 6 April 2015, according to a timetable laid down in clause 5 (although Ministers aim to make the change by 2012). The guarantee credit element of state pension credit will continue to rise in line with earnings as now. Other benefits will continue to be index-linked to the RPI. The link between the basic state pension and the LEL is to be scrapped: future increases in the LEL will be at the Treasury's discretion.

Additional pension: deemed earnings factors

Those who continue to believe the Government cannot be entirely serious about simplifying state pension arrangements will find Clause 9, covering two whole pages, reassuringly complicated (indeed most of this Bill runs true to form in that respect). It concerns entitlement of low earners reaching state pension age in 2010/11 or later to accrue S2P, including after the new flat rate of £1.40 per week (subject to uprating) is introduced.

Additional pension: simplification of accrual rates

Clause 10 amends Schedule 4A to the SSCBA 1992, which contains the rules for the calculation of additional state pension. As the first step towards introducing a flat rate additional pension, it removes the 'Band 3' accrual rate (which is 20%) on earnings factors between the upper earnings threshold and the upper earnings limit currently used in calculating S2P, starting from the 2010/11 tax year. Clause 11 says "'the flat rate introduction year' means such tax year as may be designated as such by order".

Increase in state pension age

The first increase in state pension age, from 65 to 66, will be phased in between April 2024 and April 2026 - plenty of time for further changes of mind. State pension age will be 66 for those born in the period 6 April 1960 to 5 April 1968. By 2050 it is anticipated to be 68, but who knows?

Part 2 - Occupational and personal pension schemes

Conversion of guaranteed minimum pensions

Way back in the Palaeolithic era of simplification (actually, February 2003) the DWP consulted on options for dealing with the complexity posed by administration of GMPs. The following October it announced that schemes were to be given the option to convert GMPs into their own scheme benefits, on the basis of actuarial equivalence. After three years of silence, draft legislation has emerged to allow a scheme to omit provision for a GMP or a survivor's GMP, where certain conditions are satisfied. Clause 14(3) sets out these conditions, in the form of new sections 24A - 24H in PSA 1993; including no conversion to money purchase benefits, survivor benefits required, and no reductions to pensions in payment. Subject to regs and member consent, a transfer may include a converted GMP (with survivor benefit). A person who has had his GMP converted shall continue to be treated as entitled to that GMP for the purpose of calculating entitlement to additional state pension (the 'contracted out deduction'). Regs are to specify how actuarial equivalence is to be determined.

Abolition of contracting-out for defined contribution pension schemes

This is largely enabling legislation, to commence from a date to be decided; the DWP is currently considering responses from the industry to a consultation (see Aries article) on the practical difficulties. However, it appears that existing (pre-abolition date) protected rights will remain as such.

Dispute resolution arrangements

Clause 16 amends s.273 PA 2004, which the DWP announced last January would not be brought into force as it stood. (The problem was that the one-stage process would have required trustees to deal with every complaint themselves, with no scope for delegation.) Clause 16(4) inserts subsection (4A) into the new s.50. This provides trustees or managers of an occupational pension scheme with the option of adopting two-stage dispute resolution arrangements, delegating another person to investigate first (this is in fact currently the requirement under s.50 PA 1995). Any decision by the trustees or managers will confirm or replace any first-stage decision.

Removal of Secretary of State's role in approving actuarial guidance

Clause 17 and Sch 5 remove various powers in primary legislation to approve actuarial guidance.

Part 3 - Personal Accounts Delivery Authority

Clause 18 establishes a body corporate called the 'Personal Accounts Delivery Authority' (the "Authority") upon Royal Assent of the Bill to cover the whole of Great Britain and Northern Ireland. It states that the Authority is not a servant or agent of the Crown, and as such does not enjoy the associated status, immunity or privileges. The clause also introduces Sch 6, which contains provisions about the membership of the Authority and other matters. The Secretary of State is empowered to appoint the members (between three and nine in number).

The Authority's primary role will be to implement "a national low-cost portable pensions savings scheme" (clause 19(2)). Personal accounts are not regarded as a certain winner, yet, however; clause 21 provides for winding-up of the Authority on abandonment of the proposals for the scheme.

Part 4 - General