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Government Set To Push Through Pension Reform

While there has been much criticism of the government’s handling of the ongoing pension crisis there seems to be action at last from the authorities with regard to schemes which are under funded. Mike O’Brien, the Pensions Reform Minister, is ready to announce a change to the current laws which will give the Pensions Regulator a lot more power.

It is hoped that the new power will be used to order companies to top up their pension funds in order to ensure the future payment of pensions. While the change looks very straight forward and sensible there are fears in the pensions industry that the direct involvement of the regulator in these matters will put at risk any future final salary schemes.

There are also concerns that by forcing the pension administrators to increase contributions this will affect the overall health of the business and put major strains on cash flow. Recently there have been a number of high profile schemes that have ‘encouraged’ their members to convert to money purchase schemes with the promise of short term rewards and bonuses. However, the problem is that what looks good in the short term may not be as beneficial in the longer term.

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