Workers will be able to retire on two-thirds of average earnings and defined benefit schemes will be restructured to carry less risk, if new proposals by the National Association of Pension Funds (NAPF) are put into practice by the government.
Under the association’s Fit for the Future plan – NAPF’s vision for pensions – employers will also be given greater assistance with the running of corporate pension programmes, and the statutory minimum contribution from both employers and employees will be raised from 8% to 11%.
According to the NAPF, such a rise would ensure all workers had a retirement fund worth around one-third of their former earnings.
The association has recommended the development of new forms of risk-sharing defined benefit (DB) and defined contribution workplace schemes. This would include a “core DB scheme” which would not require employers to provide spouses pensions or inflation proofing, and carry far less financial risk than current DB plans.
Joanne Segars, NAPF chief executive, said: “Our proposals are designed to create a pension system which is fit for the 21st century. They increase the value of the state pension for everyone, radically reduce concerns over means-testing, and increase the value and quality of workplace pensions. The government’s 2012 reforms are a major step forward, and our proposals complete the task.”