Britain’s pensioners have the fourth highest level of poverty in Europe, according to figures published today by the European Commission.

The over 65’s in Britain are, on average, worse off than their counterparts in Romania, Poland and France.

The research, which compared relative poverty in the 27 member states, showed nearly one in three UK over-65s were at risk of poverty – the same proportion as in Lithuania (30 per cent).

Only pensioners in Cyprus (51 per cent), Latvia (33 per cent), and Estonia (33 per cent) came out worse. The EU average was 19 per cent.

The figures came ahead of the work and pension committee’s review of government efforts to tackle pensioner poverty, which is due to be published on Thursday.

Michelle Mitchell, charity director for Age Concern and Help the Aged, said the report demonstrated that many older people were being left behind.

“In a country where the richest have incomes five times higher than the poorest, older people are disproportionately bearing the burden of this inequality,” she said.

Steve Webb, the Liberal Democrat Shadow Work and Pensions Secretary, blamed the Labour Party for failing to address poverty in old age. He said: “The basic state pension is simply too little to live on for the millions of pensioners who have no other income. Labour’s complex and undignified system of means-tested benefits has meant that many pensioners do not even claim the extra help that they are entitled to.

“We need a more generous, universal pension based on citizenship that would give pensioners a sense of dignity and a stable income in retirement.”

The EU study found pensioners in the Czech Republic were least likely to be living in poverty, with 5per cent below the threshold of an income of 60per cent of the national median.

A UK government-backed agency which pays pensions for workers whose employers go bust said on Tuesday it will keep the charge it levies on company pension schemes stable for the year 2010/2011 but warned it may have to charge more in the future.

The Pension Protection Fund (PPF), which charges schemes an annual levy partly based on how well each scheme is funded, said its 2010/11 levy would be 700 million pounds ($1.15 billion) plus inflation, in line with the commitment it made in 2007 to keep its levy stable for three years.

The inflation component will be known later this year.

PPF chief executive, Alan Rubenstein, a former Lehman Brothers banker recruited earlier this year, said: “Despite the economic climate deteriorating considerably since last year, we believe it’s important to stick to our commitment made in 2007.”

“But it is important for us to again make clear that, while we want to relieve some of the burden faced by employers and schemes during the recession, we will consider in the future raising the amount of levy we collect above the rate of inflation, if necessary, to meet our commitments.”

The PPF currently has assets of almost 3 billion pounds.

“With average compensation at 4,000 pounds a year per member, it has more than enough money to make compensation payments,” the agency said in a statement.

Pension sharing orders have been extremely useful tool since their introduction a decade ago, particularly in relation to public sector schemes such as those provided through the armed forces or NHS. However, they have at times proved to be a rather blunt instrument.

One of the most commonly encountered difficulties with such unfunded government schemes has been the ‘income gap’, ie the differing ages at which the parties will receive their pension benefit. This has occurred where a husband, for example, is aged 55 and in receipt of his army pension and the wife, is also aged 55, finds that a pension sharing order in her favour will not result in benefits being paid to her until she is aged 65. Therefore, if the pension sharing order is made now, not only does the wife have to wait 10 years to receive benefits under the scheme, the husband’s income in the meantime is depleted by the amount of the pension credit which is made to the wife. Whilst it has been possible to agree to adjourn the issue of pension sharing until the wife is old enough to receive the benefits applicable, this has been an entirely unsatisfactory solution. It has therefore come as very welcome news that this problem is being addressed, albeit in a piecemeal fashion across the various government schemes.

The first step has been the amendment to previous Pension Sharing Regulations via the Occupational, Personal and Stakeholder (Miscellaneous Amendments) Regulations 2009 which came into force on 6^th April 2009. Pension Scheme providers are now able to pay pension credit members (ie those spouses benefiting from a pension sharing order) their pension benefits from the normal minimum retirement age which is currently age 50 but which will extend to 55 from April 2010. Although it should be noted that there is no obligation on scheme providers to pay the pension credits early, it does seem that some of the major schemes are choosing to do so.

Most notably, the Armed Forces Pension Scheme etc (Amendment) Order 2009 has reduced the age at which pension credit members are entitled to their pension from 65 to 55, provided that the pension sharing order is made after 6^th April 2009. Furthermore, for those orders made before this date, it is now open to them to receive early payments of their pension from age 55, although this will be subject to an actuarial reduction. Therefore, if we have assisted clients in the past to receive a pension sharing order from an armed forces pension scheme, it may be worth contacting them to let them know that they are able to receive benefits earlier than had been anticipated, albeit at a reduced level.

The National Health Service Pension Scheme and Injury Benefits (Amendment) Regulations 2009 which also came into force on 6^th April 2009 similarly provides that a pension credit member shall be entitled to the payment of benefits from the normal minimum retirement age, again with an actuarial reduction.

It has yet to be seen whether other schemes will follow suit, although it is understood that many intend to do so. Where the new regulations have yet to be adopted by a scheme, it may unfortunately remain necessary to adjourn the pension sharing application until the position has become clear in respect of that scheme. However, it is promising that some of the major providers have already taken steps to implement the regulations and it is hoped that this will allow practitioners to provide fairer solutions for their client and avoid revisiting the pensions point many years after separation.

The compensation payable to defined benefit pension scheme members, whose employers have gone bust, will be capped at £31,936.32 for people aged 65, the Pension Protection Fund announced.

This figure, which comes into effect from 1 April 2009 and represents a 3.5 per cent increase from 2008/09, was ratified in an order laid before Parliament.

The compensation cap for those scheme members who have taken early retirement also increases by the same percentage.

Under PPF rules, those people who are already retired when their employer went bust receive 100 per cent of what they are entitled to.

But, because those who have yet to retire will receive 90 per cent of what they were entitled to, their compensation will also be capped at the 90 per cent level, ie £28,742.68.

The average payout to people whose schemes have transferred into the PPF is £4,000 a year.

Men retire on average at the age of 64.6 and women at 61.9yrs

The state pension age for women will gradually rise from 60 to 65 between 2010 and 2020

For men and women, the state pension age will rise from 65 to 68, between 2024 and 2046

The Pensions Act 2008 provides the legislative framework for the government’s pension reform.  It is planned by 2012 that the provisions of the Act will require all employers to provide a workplace pension, enrol all employees who meet certain criteria and contribute a minimum of 3% of salary (between an upper and lower limit).   The Personal Accounts Delivery Authority (PADA) will set up a pension scheme, known as ‘Personal Accounts’, which employers will be able to use if they do not wish to set up or maintain their own pension provision.  This will enable them to fulfil their new obligations.

Although the Act has been passed to bring these requirements in from 2012, there are still further regulations to come.  Also, the design of these schemes has not been set by the legislation but will be designed by PADA, so there is uncertainty about what the Personal Accounts scheme will look like and the structure of charges.  The aim is for these schemes to be low cost.

For an individual seeking financial advice today, their circumstances in 2012 will be unknown.  It is likely that if they are employed at that time, their employer will offer a workplace pension with an employer contribution; this might be through a Personal Account or through another workplace pension, which will have to meet specific minimum standards if it is to qualify as an alternative scheme.

Where any individual has a need and a desire to save (be that generally or specifically for retirement) there should be no question of delaying saving until 2012.  Putting off saving would not be in the best interests of the individual.

When financial advice is given, current circumstances will be taken into account together with the extent to which the future pension reforms will be a factor.  The extent to which they are a factor will increase, as we get closer to this implementation date and as the design of the Personal Accounts becomes clearer. 

The PPF took one scheme under its wing last month (November), resulting in a further 402 people around the UK now receiving compensation – or will do so in the future.

Bonas Group Pension Scheme transferred in to the PPF last month.

To date:

• 67 schemes are now in the PPF
• 20, 645 people are receiving or will receive compensation in the future
• The PPF paid out more that £4.8million in compensation between 2 November and 1 December
• The average yearly compensation is £4,700 per person
• The oldest recipient is 103, and the youngest is six years old
• The PPF now has a total of 273 schemes in its assessment period and a total of 121,300 members.

Details of the schemes that have transferred can be found on our website at: http://www.pensionprotectionfund.org.uk/index/transferred-schemes.htm

This also includes details of schemes currently in the assessment period and those schemes that have completed assessment but have not transferred in for whatever reason.

The Pension Protection Fund (PPF) has confirmed that it has set a pension protection levy estimate of £700 million for 2009/10.

This fulfils a promise made in August 2007 when the PPF said that it would set a levy estimate of £675 million for the next three years, indexed to wages, so long as there was no significant change in risk.

As also promised earlier in the year, the PPF has confirmed a final levy scaling factor (which schemes can use to calculate their individual levy bills) of 2.22, in advance of the 2009/10 levy year.

The PPF stated that the decision to keep the same levy estimate as last year, indexed to wages, was not an easy one but it believes it is one that had to be taken to help reduce the burden on levy payers, particularly during the current economic downturn.

The decision to publish the final levy scaling factor number in advance of the 2009/10 levy year will help levy payers with their financial planning and provide further certainty.

The PPF has responded to industry feedback during the consultation on the 2009/10 levy by making minor changes to its other 2009/10 proposals, set out in the policy statement published last week.

The government is to review legal safeguards preventing unscrupulous employers from walking away from their pension schemes, after complaints the rules hinder legitimate corporate reorganisations.

Pensions Minister Rosie Winterton said on Wednesday her department had begun an informal four-week consultation on Section 75 of the Pensions Act to help ease the cost of company pensions.

“Where government can help ease the burden on employers who run pension schemes at this time we should, but not at the expense of protecting people’s pensions,” she said.

“This is a difficult area, and it may not be easy to find a way to address the issues without creating loopholes.”

The rules are designed to stop companies deliberately reorganising their corporate structure so they can evade their responsibilities for a pension scheme at a subsidiary firm.

They were tightened in 2004 after Dutch shipping firm Maersk tried to wind up a pension scheme at a British subsidiary without putting in the extra money needed to fund the benefits owed to its members.

But the Confederation of British Industry has complained that the obligation to fully fund schemes every time there is a change of sponsoring employer was preventing companies from conducting cost-saving corporate reorganisations.

Winterton said the consultation would seek views on ways of not triggering an immediate funding requirement in reorganisations where the employer remained committed to the pension scheme.

“These proposals are very welcome and would remove funding rules that currently do not improve pension security for employees, but add massive costs to companies looking to restructure,” said CBI Deputy Director-General John Cridland.

The Trades Union Congress said it was concerned that pension protections could be weakened.

“There seems to be a pretty clear choice here. Either companies meet their pension scheme liabilities or they don’t. We doubt that any review can overcome this fundamental point,” said TUC General Secretary Brendan Barber.

Alicie Tse, an analyst at pension consultancy Mercer, said the review had to find a balance between the competing interests of employers and their workers.

“It’s good to have the flexibility for employers, but on the other hand there needs to be sufficient protection for employees built in as well.”

Having considered the responses to its consultation paper, the Pensions Regulator has today published final guidance to assist trustees in calculating transfer values in defined benefit schemes.

From 1 October 2008, it will be the responsibility of trustees to take the decisions on which the calculation of cash equivalent transfer values (CETV) is based – as set out in government legislation. Previously, the calculation had to be certified by the scheme’s actuary.

While many of the consultation responses have been taken into account for clarity in the final guidance, there are no new principles involved and its primary purpose is to assist trustees with their new responsibilities.

Chris Dobson, Pensions Regulator executive director of strategic development, said: “Trustees will need to produce transfer values appropriate for their scheme. We have produced this guidance to help trustees understand and fulfill their responsibilities, and give our views on good practice.”

To view the full press release visit: http://www.thepensionsregulator.gov.uk/mediaCentre/pressReleases/pn08-21.asp