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| Long title | An Act to amend the law about pensions and for connected purposes. |
|---|---|
| Citation | 1995 c. 26 |
| Territorial extent | United Kingdom |
| Dates | |
| Royal assent | 19 July 1995 |
Status: Amended | |
| Text of statute as originally enacted | |
The Pensions Act 1995 (c. 26) is a piece of United Kingdom legislation to improve the running of pension schemes.
Following the death of Robert Maxwell, 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.
The main features of the Act included:
Many of the features introduced by the Act were abolished or amended by the Pensions Act 2004. The MFR was heavily criticised in the Myners Report (2001), [1] which was a HM Treasury sponsored report into institutional investment in the UK. The Myners Report identified three problems with the MFR:
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) [2] 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.
The Act also affects state pensions . A significant change was the phasing in of equalisation of state pension ages for men and women over a ten-year period.
In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodic employee contributions come directly out of their paychecks, and may be matched by the employer. This pre-tax option is what makes 401(k) plans attractive to employees, and many employers offer this option to their (full-time) workers. 401(k) payable is a general ledger account that contains the amount of 401(k) plan pension payments that an employer has an obligation to remit to a pension plan administrator. This account is classified as a payroll liability, since the amount owed should be paid within one year.
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:
A pension fund, also known as a superannuation fund in some countries, is any program, fund, or scheme which provides retirement income.
The Minimum Funding Requirement (MFR) was a part of United Kingdom legislation in the Pensions Act 1995, and was introduced on 6 April 1997. The Pensions Act 2004 abolishes the MFR replaces it with new "statutory funding objective"; this came into force on 30 December 2005 for all pension schemes with a valuation date after September 22, 2005.
The Employee Retirement Income Security Act of 1974 (ERISA) is a U.S. federal tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries by:
Pensions in the United Kingdom, whereby United Kingdom tax payers have some of their wages deducted to save for retirement, can be categorised into three major divisions - state, occupational and personal pensions.
Superannuation in Australia or "super" is a savings system for workplace pensions in retirement. It involves money earned by an employee being placed into an investment fund to be made legally available to fund members upon retirement. Employers make compulsory payments to these funds at a proportion of their employee's wages. From July 2023, the mandatory minimum "guarantee" contribution is 11%, rising to 12% from 2025. The superannuation guarantee was introduced by the Hawke government to promote self-funded retirement savings, reducing reliance on a publicly funded pension system. Legislation to support the introduction of the superannuation guarantee was passed by the Keating Government in 1992.
A defined contribution (DC) plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts plus any investment earnings on the money in the account. In defined contribution plans, future benefits fluctuate on the basis of investment earnings. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings to an individual account, all or part of which is matched by the employer.
A child trust fund (CTF) is a long-term savings or investment account for children in the United Kingdom. New accounts can no longer be created as of 2011, but existing accounts can receive new money: the accounts were replaced by Junior ISAs.
Paul Myners, Baron Myners, was a British businessman and politician. In October 2008 he was elevated to the House of Lords as a life peer and was appointed City Minister in the Labour Government of Gordon Brown, serving until May 2010. As City Minister Myners was responsible for overseeing the financial services sector during the global financial crisis and its aftermath, including leading the controversial 2008 United Kingdom bank rescue package. Myners sat in the House of Lords as a Labour peer until 2014, resigning to become a non-affiliated member before joining the crossbench group in 2015.
The Pensions Act 2004 is an Act of the Parliament of the United Kingdom to improve the running of pension schemes.
The Pension Protection Act of 2006, 120 Stat. 780, was signed into law by U.S. President George W. Bush on August 17, 2006.
Limited price indexation (LPI) is a pricing index used to calculate increases in components of scheme pension payments in the United Kingdom. Currently, the statutory requirement for occupational pension schemes is that pensions in payment must be increased by the lower of RPI and 2.5%. Usually the lesser of the annual increase in the Retail Prices Index and 5%, although the percentage limit can vary.
Institutional Investment in the UK: A Review was a report to HM Treasury in March 2001 on institutional investors. It was delivered by Paul Myners.
Rosalind Miriam Altmann, Baroness Altmann, is a British life peer, leading UK pensions expert, and political campaigner. She was appointed to the House of Lords following the 2015 general election as a Conservative, but describes her work both before and after the election as being politically independent, championing ordinary people and social justice.
A qualifying recognised overseas pension scheme, or QROPS is an overseas pension scheme that meets certain requirements set by HM Revenue and Customs (HMRC). A QROPS can receive transfers of British pension benefits. The QROPS programme was part of British legislation launched on 6 April 2006 as a direct result of EU human rights requirements of the freedom of capital movement.
Small Self Administered Scheme (SSAS) is a type of UK Occupational Pension Scheme.
Defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns. Traditionally, many governmental and public entities, as well as a large number of corporations, provide defined benefit plans, sometimes as a means of compensating workers in lieu of increased pay.
Income drawdown is a method withdrawing benefits from a UK Registered Pension Scheme. In theory, it is available under any money purchase pension scheme. However, it is, in practice, rarely offered by occupational pensions and is therefore generally only available to those who own, or transfer to, a personal pension.
Houldsworth v Bridge Trustees Ltd [2011] UKSC 42 is a UK pensions and UK labour law case concerning the difference between a final salary and a money purchase pension scheme. It matters because final salary schemes fall under the minimum funding requirements, whereas money purchase schemes do not.
