With 15 million people saving for their retirement through a pension, and millions already drawing a pension, this is a topic that must be on the priority list for a new government, whatever the colour. And even more so, given that, over the next 25 years, the UK faces a 32% increase in the number of pensioners, but only a 14% increase in the working-age population.
The new government must take account of the critical role played by workplace pensions in providing UK citizens with a decent retirement income, and put in place bold new policies that hardwire incentives to save into the system.
In the past there has been a huge raft of pensions-related legislation, making pensions ever-more complex and difficult to understand. Between 1995 and 2009, there has been, on average, a new piece of pension regulation implemented each week. Parliament has passed no less than four Pensions Acts. So we don’t need an overload of new legislation, but we do want bold and progressive actions that deliver a decent income for retirees.
Our recommendations are:
- Create a foundation pension, a simpler state pension system, to provide a state pension of £8,000 a year and lift two million pensioners out of means testing.
- Put workplace pensions back at the heart of good pension provision, via large, low cost ‘super trusts’, offering benefits to savers and employers who will provide access to high-quality pension arrangements.
- Encourage new forms of risk-sharing pensions, as well as increasing mandatory contributions and developing new forms of low-risk pensions, to give employers more certainty over the cost of pension schemes.
- Create an independent Public Sector Pensions Commission to make recommendations, while removing the issue of public sector pensions from the political arena.
- Scrap damaging changes to pensions taxation, instead introducing measures to encourage people to save for their old age.
The UK’s pensions system was once the envy of the world, but in recent years it has been transformed into one where 12 million people are either not saving at all or not saving enough. Previous governments have failed to tackle this issue, perhaps because it’s such a long-term problem. Now is the time for decisive action, to secure a future where all our citizens have an adequate income for their old age.
Joanne Segars, chief executive, National Association of Pension Funds (NAPF)