Queen's speech: key personal finance issues

Pensions bill

The Queen announced legislation aimed at encouraging employers to provide good quality pensions and individuals to save more effectively for their retirement.

She said that "a pension protection fund will be set up to protect employees and pensioners if companies become insolvent."

According to Malcolm McLean of the Office of the Pensions Advisory Service, this is likely to be funded by a levy on pension schemes, fixed at a rate in relation to the size of a company's liability and risk rating.

"There is no doubt there is a crisis of confidence in pensions. People read about all the problems and they do not feel confident," said Mr McLean.

"The government needs to succeed in convincing people that systems are secure and that they can have confidence. A lot of this is still unclear. We do not know, for example, what will happen if, in the first year, a FTSE-100 firm goes bust and wipes out the fund. The theory is that this will be self-funding and self-supported but will the government bail them out if necessary?"

Other measures were also included in the bill, which were aimed at simplifying pensions and encouraging people to save more.

The government intends to introduce an online retirement planning service, which would help people estimate how much retirement income they will have. This would be based on details of their state pension entitlement and any personal or occupational schemes of which they were members. The service would also provide options on how they could address any shortfall.

There will be incentives to encourage people to put off drawing their state pensions, receiving either an increase in their weekly pension for each year they deferred it or a one-off taxable sum.

There has been speculation that this would amount to ?30,000 for people who put off claiming a full state pension for five years.

The bill also includes a series of measures to reduce the cost and red tape for firms that offer pensions, and make it easier for them to change their schemes.

The requirement for companies to increase occupational pensions in line with the retail price index will be relaxed; rules on contracting out of the state second pension will also be simplified, removing the need for a guaranteed minimum pension.

The bill detailed plans for a new, more proactive pensions regulator to replace the Occupational Pensions Regulator Authority, moving away from a "bureaucratic checklist" to focus on the major concerns of scheme members, such as fraud and administration problems.

Child trust funds bill

The Queen announced the introduction of a bill that will "provide all children born from September 2002 with a child trust fund with an initial endowment from the government and more for poorer children. This will mean that when children reach the age of 18 they have an asset to draw on as a springboard for the future."



Baby bonds were announced with a fanfare some two years ago but are only just becoming a reality. They will provide a ?250 fund for most parents of babies born after September 1 2002, while those on lower incomes (those receiving child tax credit and with a household income below ?13,230) will get ?500.

The government will make a further payment into the fund when the child is seven, and friends and family will be able to contribute up to ?1,200 a year.

The government plans to make the funds available from April 2005, and parents will have a choice of where they invest the money ranging from a simple cash savings account to investing in shares through a unit trust or risk-controlled stakeholder-style product.

However, some financial institutions have already said it would be difficult, even impossible, for them to offer child trust fund products if the government insists on capping charges as low as 1%.

Baby bonds also came under fire when the Treasury admitted that the fund would count against benefits should the child leave school and claim jobseeker's allowance, and grandparents could lose some pension benefits if they made gifts to their grandchildren.

Civil partnerships bill

Changes to the law for same sex couples are under way. The moves, covering England and Wales, will allow gays to benefit from a dead partner's pension, grant next of kin rights in hospitals and exempt them from inheritance tax on a partner's home.

Deputy minister for women and equality, Jacqui Smith, said last week: "Same sex couples have been invisible in the eyes of the law for too long.

"The right to be treated equally and fairly is fundamental. It is the foundation upon which everything else depends and allows individuals to pursue the other aspects of their lives."

Housing bill

Also included in the speech was the introduction of legislation on housing that will "help create a fairer housing market and protect the most vulnerable".

According to the Royal Institution of Chartered Surveyors, this is aimed at making the process of buying and selling a home faster and more transparent for both buyer and seller.



The main element of the bill will be the "home information pack" which sellers will be obliged to compile before they put their property on the market. This is likely to comprise:

· Evidence of title of the property
· Replies to standard questions asked by buyers
· Copies of any planning, listed building and building regulation consents and approvals
· Copies of warranties and guarantees for new properties
· Local authority searches

The pack will also include a home condition report, which is essentially a homebuyer survey and valuation without the valuation part. This will cover the condition of the property but will also include an energy efficiency report.

The whole pack is likely to cost sellers between ?600 and ?1000 to compile and will not be in place until 2006.