Nearly four years after Robert Maxwell's death, the Pension Bill he spawned is about to become law. What does it mean for you?

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The Independent Online
When a monster Pensions Act is passed, as will happen next week once the 177-clause 1995 Pensions Bill receives Royal Assent, you are entitled to ask what's in it for me? The answer depends first on whether you belong to a pension scheme at work, have a personal pension, or are relying wholly on the state. Second it depends on which part of the new law you have in mind. The wide range of issues covered by the Bill would normally have been the subject of several Acts.

As it is, we have one piece of legislation that brings in a range of new security measures aimed at remedying certain weaknesses which came to light following the death of Robert Maxwell. As well as dealing with a range of assorted technical issues the new Act will:

r Provide for occupational pensions to increase (within limits) to offset the effects of inflation;

r Implement in UK law recent rulings from the European Court of Justice outlawing sex discrimination in pension schemes;

r Equalise state scheme pension ages at 65 for men and women by 2020.

r Radically change the terms on which people can opt out of the State Earnings Related Pension Scheme (Serps).

r Make provision for dealing with pension rights in divorce settlements.

If you are in a pension scheme at work, the most visible sign of the Act taking effect is likely to be a review of the present arrangements for appointing trustees to manage the scheme's affairs.

By April 1997 all schemes must carry out ballots enabling members to elect at least a third of the trustees. As an alternative, employers may obtain the approval of at least 90 per cent of the membership to some other arrangement (such as the appointment of professional trustees).

Involving members more closely in the running of their schemes is one of the "post-Maxwell" measures (although, ironically, the Mirror Group Newspapers scheme did have member trustees), but a few warning notes should be sounded to individuals enthusiastic to become trustees. It is essential to understand exactly what is involved. The legal duties are onerous and the Act imposes considerable new responsibilities on trustees and introduces a range of sanctions for misdemeanours.

If you are looking for a position of power to influence your employer to improve benefits, trusteeship is not for you. Trustees must administer their trusts on an impartial basis; negotiation on benefit levels is not part of their duties.

The trustees will hire and fire professional advisers, monitor their performance and negotiate terms. They must set investment strategies in consultation with the employer and appoint authorised professionals to implement them unless they themselves are authorised under the Financial Services Act. Members will play a big part in running schemes and training must be provided when required - but find out what is involved before rushing in.

Members will also feel the benefit of the new law when they begin to receive more and better information about their scheme, including the investment strategy. Some employers will see the Act as a rare opportunity to review schemes from first principles rather than allowing further piecemeal evolution of an expensive employee benefit.

One of the main issues employers will need to watch is that of sex discrimination - indirect rather than between men and women, which should largely have been eradicated by now. This is usually illustrated in the context of the eligibility of part-time workers for pension schemes. If the part- timers are mostly women, for example, excluding them may be held to constitute indirect discrimination against women. New scheme designs and options introduced to satisfy the needs of ever-diversifying workforces will have to be stringently scrutinised to see that they do not inadvertently fall foul of this principle.

Personal pension-holders are likely to be affected mainly by the new terms for contracting out of Serps. In the past the terms have been good value only up to the early Forties. The new terms from April 1997 are meant to appeal at most ages but you should seek advice on whether, or how, the change will affect existing policies and future plans.

Employed people who are in neither an occupational nor a personal pension scheme will be relying on the state old-age pension plus Serps. If you are in this category but eligible to join a scheme at work, monitor the changes introduced as a result of the Act and keep an open mind. The scheme may change in ways that appeal to you or may offer new "joining amnesties" to those who have declined membership in the past.

If no employer's scheme is available to you, take advice on whether the new contracting-out terms mean that a personal pension will be better value for you than Serps.

The divorce provisions - a share of your ex-spouse's pension to be paid to you when he or she reaches retirement - are a step forward in England and Wales but fall well short of the clean-break pension-splitting principle that has been widely advocated. The new provisions will apply for future divorces only and will provide nothing for those whose ex-spouses die before drawing their pensions. There is still far to go before a more satisfactory basis is introduced.

Overall, the Act goes a long way to improve matters but like most legislation it falls short of expectations in some important respects. Some of these will only emerge in years to come. In the meantime, find out what's in it for you through your employer, financial adviser or DSS office.

The author is European Policy Director at Sedgwick Noble Lowndes.

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