Labour may fight govt’s scheme pension attack

Shadow pensions minister Gregg McClymont said he is willing to listen to the industry over fears for scheme pensions.

A controversial clause introduced to the Pensions Bill at its last reading threatens the future of scheme pensions, but McClymont said he is willing to fight its corner for the industry.

"I am keen to hear representations from the industry on this issue as I can see why there is concern," said McClymont, pictured.

"The government has said this change is necessary, but I am willing to look into it."

Scheme pensions are annuities paid directly by the scheme provider to the member rather than via an insurer.

The clause, introduced by pensions minister Steve Webb, would place scheme pensions under defined benefit (DB) rules rather than defined contribution (DC) rules.

This would mean scheme pensions would face the higher costs DB schemes must pay and kill off a large part of the market, experts said.

Andy Tulley, retirement income technical manager at MGM Advantage said: "Scheme pensions will become much more expensive as they will have to pay the Pension Protection Fund (PPF) levy and get actuaries much more involved with the scheme.

"It may not kill scheme off completely, but it will kill off the £100,000-pot market for scheme and will stop providers marketing it as cheaper than drawdown."

Tulley said added the government created scheme for groups of employees, not individuals, and has been uncomfortable with its use by individuals to beat both annuity rates and drawdown limits.

"The government does not want people bending the rules and using scheme to get more money out than they should, and then running out of money," he said.

However, Robert Graves, director of SIPP provider Rowanmoor, urged the industry to wait for the detail.

"The DB rules are all about occupational schemes, so even if personal scheme pensions were classified as DB, they would not be occupational and so not affected," he said.

He added Rowanmoor is seeking legal advice over the issue but does not anticipate damage to the smaller scheme pension market.

The government has included a pledge to consult on transitional provisions to protect trustees and members of current scheme pensions from harsh new rules.