UK - High earners must be allowed back into the mainstream pensions system to get retirement savings back on track, key industry leaders have told the government.
The Society of Pensions Consultants, the Faculty of Actuaries and accounting giant PricewaterhouseCoopers have all told the select committee on pensions that it must work to get company directors on side in order to solve the “pensions crisis”.
SPC president Donald Duval urged the committee not to cut high earners out of the pension system through wage caps.
He said: “High earners need to be let into the main system so the decision-makers are interested in the company pension scheme. If you want to remove tax incentives to higher earners, fine.”
He added that many directors had come to realise that cutting their pension scheme was not going to hurt recruitment and that as such there was no competitive advantage in having a good pension scheme.PwC partner Peter Tompkins echoed Duval’s views.
Tompkins said: “If you take people out of the pensions system they will have no interest in its perpetuation.”
He added that the government must not lose sight of the fact that the pensions crisis depended on how much was being saved now – not how much was being provided.
He said the biggest challenge was to keep the amount of pensions contributions up – something that was not apparent in the switch from final salary to money purchase provision.
PwC partner John Hawksworth stressed there had been a change in attitude from companies towards their staff as “assets to the firm” and there was no longer the impetus to have a good, costly pension scheme.
“Companies have had to face up to the reality of the costs of final salary schemes. And many companies have discovered that pension schemes do not deliver shareholder value.”
But Faculty of Actuaries’ chairman Ronny Bowie countered: “Any company that has closed a DB scheme and thinks it is making any material difference to its financial risks for the next 20 years has got its head in the sand.”
The Centre for Social Justice is calling for the state pension age to be raised to 70 by 2028 and to 75 by 2035, a much faster rise than currently planned.
The High Court has blocked the £12bn transfer of Prudential's annuity book to Rothesay Life, citing the insurer's lack of "established reputation" and differing "capital management policies".
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