Article by Elizabeth Smith, Associate, Chartered Legal Executive
The Pensions Act 2008, introducing Personal Accounts, came into force in 2012. These far-reaching reforms to pension legislation, designed to ensure that people in employment make some pension provision during their working lifetime, will have ongoing significance for all claimants who bring a personal injury claim.
One key element of the legislation is that it is for the employee to decide whether to remain in the scheme and not the employer, but even if the employee chooses to opt out they will be automatically re-enrolled every three years and it is anticipated that irrevocable compulsory membership will be introduced in due course.
Compulsory employer contributions will be phased in, starting at 1% and rising to 3% of band earnings. There will also be employee contributions of 4%, with the Government contributing a further 1% by way of tax relief. The employee contributions will also be phased in. As a result of this new legislation there is now a legitimate claim for lost employer contributions throughout a claimant's working life and also the loss of the 1% "tax relief" contribution, in every future loss of earnings claim.
As a consequence of these changes almost every personal injury claim, incorporating a claim for future loss of earnings, should now include a calculation for loss of pension benefits. Gone are the days when it could be argued that the claimant didn't have or want a pension and, therefore, there was no loss.
As existing pension schemes must meet the new criteria, such a claim also extends to money purchase, group personal pension and group stakeholder pension schemes.
Pension loss should also be considered in fatal accident claims, where a spouse will have lost the benefit of these additional contributions and there could also be a loss of additional benefits. A pension loss claim in respect of a fatal accident may still be applicable even if there has been a payment to the deceased's beneficiary by the pension fund.
In addition, if a severely-injured claimant is employing a carer as a result of their injury, the pension reforms need to be taken into account as there will be an increase in the cost of that care as a result of a compulsory employer contribution.
The legislation significantly changes the legal landscape. For more information on how this may affect the value of your claim or for advice on pursuing a claim, please contact Wolferstans on 01752 663295 and ask to speak to a member of the personal injury or medical negligence team.