The Government must not damage the UK’s savings culture by unpicking the package of pensions reforms due in 2012, pensions experts told the pensions minister Steve Webb today (Wednesday).
The National Association of Pension Funds (NAPF) said it was concerned that the Government will delay the timing of auto-enrolment into pensions, alter the terms of the 2012 programme, and question the future of the planned National Employment Saving Trust (NEST).
Mr Webb was due to be a guest this morning at an NAPF seminar to speak to the pensions industry about the Government’s agenda on pensions. The previous government planned to auto-enrol all employees into an existing workplace pension or the new government-sponsored scheme, NEST. The NAPF said that there is an urgent need to increase and improve saving for retirement, particularly among the vulnerable and lower paid. It stressed that the 2012 proposals represent the best available route for doing so.
Joanne Segars, NAPF Chief Executive, said:
“When it comes to their retirement, 12 million people in the UK are either not saving at all, or are not saving enough. It has taken almost a decade to arrive at this package of reforms, which will help more people to secure a pension. The Government must not lose sight of that now. Any review of the reforms should be about the details, not the direction of travel.”
The NAPF, whose members manage £800bn in assets, also urged the Government to nurture good quality workplace pensions by creating an environment that does not place excessive red tape or tax burdens on pension schemes. This could include allowing firms to offer more affordable types of final salary pensions. For example, ‘core defined benefit’ pensions would provide employees with a core, single-life pension. Employers would not be required to pay spouses’ benefits or indexation on top of the core benefit. And Finance Act 2010 changes to pension tax relief will be hugely damaging for many people other than the high earners being targeted. The NAPF thinks that the Government should instead lower the annual allowance for tax-incentivised pension saving from £255,000 to around £50,000. It also said that the Government should further reform the state pension system, and consider the NAPF’s proposals for a simpler, single state pension called the Foundation Pension.
The Foundation Pension would offer £8,000 a year and would be fully earned after 30 years of National Insurance contributions. It would give pensioners an additional £25 a week and lift around 2 million pensioners out of means testing.
The Pensions Policy Institute has today (Wednesday) published a report into the NAPF proposals.
Ms Segars added: “The current two stream state pension system is confusing and delivers unequal outcomes, especially across the genders. The Foundation Pension would put more money in pensioners’ pockets, and it would also create a stable, guaranteed floor on which to build additional workplace pensions.”
Download full press release