CBI rejects plan for universal citizens’ pension

The CBI has rejected a central plank of what is expected to become the Government’s pensions policy.

The employers body said plans by the work and pensions minister Alan Johnson for a flat-rate, non-means-tested state pension would cost the Government billions in extra funding and would reward many richer pensioners who did not need the money.

In a submission to the Turner Commission, the CBI said ministers should continue to support the current state system based on national insurance contributions.

CBI director general, Digby Jones, said: “Although well-meaning, supporters of a universal citizens’ pension are missing the point. A much larger state pension is unnecessary for everyone and frankly the country cannot afford it.

“Those expecting to rely on the basic state pension alone face the prospect of an unacceptable drop in their living standards after retirement. But by no means every future pensioner is in that position.”

In an interim report last year the commission said that to meet the challenge of a larger elderly population either average retirement ages must rise, savings increase or taxes rise to support the state-funded pension. It is expected to produce a final report with recommendations for future pensions policy later this year.

The TUC said compulsory savings must be part of any solution to the growing pensions crisis.

“People need to save 15% of their income to provide a decent pension and in a new compulsory system employers should provide 10% and employees 5%,” the union group said.

Brendan Barber, TUC general secretary, called for a compulsory savings regime run by a body modelled on the Low Pay Commission and involving unions, employer representatives and independent experts.

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