The National Association of Pension Funds has defended its proposal to scrap the state second pension and the associated £9bn of rebates that go into company and private pension schemes.
It argued that the money should be used to provide a more generous non-means-tested, basic state pension.
But Adair Turner, chairman of the government’s Pensions Commission, has warned the move would cut private saving for pensions, at a time when most people believed that more private saving was needed, according to the Financial Times.
The news comes as research from corporate investment bank RBC Capital Markets Open Market Forum shows Britain’s largest companies made no dent in their pension schemes deficits last year.
Contributions from companies in the FTSE 100 index were at a similar level in 2004 to the previous year, at £11.4bn. But after meeting the cost of new pension promises and the interest on last year’s deficit, less than £1bn was left to reduce the £600bn underlying deficit, the research concluded.
Independent pension consultant John Ralfe, who carried out the research, said some companies think they can plug pension deficits by holding a high level of equities and “hoping for the best”. But he said, this strategy was not a substitute increasing pension contributions.