Hi, It states in the notes that "Currently, the only form of compulsion for non-State provision in the UK is where an individual (or the employer on behalf of the individual) has chosen to contract out of S2P or its predecessor SERPS." But what about Stakeholder schemes? Is this not a form of compulsion?
Companies are compelled to offer them, but the individual is not compelled to take them. This doesn't change with NEST, either - the individual can still opt out.
Barney's queries Hi Barney In response to your queries: Trust vs contract - what you said is correct. Money purchase benefits - what you said is correct. The Pensions Regulator - if the trustees sold off the scheme's assets at less than they were really worth, this would disadvantage members. The Pensions Regulator has the power to overturn the transaction. NI contributions - If an employee wants to make pension contributions out of their salary, before they can do this National Insurance contributions are taken out of that salary. But the employer can make contributions to the pension scheme without paying National Insurance on them first. NI rebates - what you said is correct. Buy to let - instead of making pension contributions to a personal or occupational pension scheme, an individual could instead buy a property. The rental payments from the property would be like a pension, an income stream expected to increase over time, although the amount of rent would of course not be guaranteed. Vesting - Your explanation of vesting is correct and miuch more common (though note that as an alternative, if a member has completed three months’ service, they may transfer the value of their benefits to an alternative pension scheme). It is much more unusual for vesting to mean becoming a pensioner (although it appears that's what the Core Reading meant in this particular case). Protected Rights - yes, Protected Rights is still an option for post 1997 service however this method of contracting out is being abolished in April 2012. Reference Scheme Test - the 2.5% increases would be capped with price inflation (not fixed). Compulsion - Calum is correct. And the company need not offer Stakeholder or NEST at all if it already has an occupational pension scheme that meets certain minimum requirements. I hope this helps, Best wishes Stuart Underwood
