UK - A large majority of pension reforms proposed by the Pensions Commission have been adopted by the department for work and pensions (DWP) who released its pensions white paper today.
The most significant proposal adopted by the DWP is the creation of a nation-wide occupational soft-mandatory pension scheme, the National Pensions Savings Scheme (NPSS) that could be implemented by 2012.
Under the government’s plans, employers must contribute a minimum of 3% into the scheme, with the government paying 1% and employees at least 4% - in line with the commission’s recommendation.
As discussed in the Pensions Commission’s second report, the state retirement age will be increased from 65 to 68 by 2050 for both men and women. Pensions will also rise in line with earnings from 2012 - two years after the commission desired.
In a interview with Radio Four’s Today Programme, Adair Turner (pictured) claimed the white paper had incorporated approximately “90 to 95%” of the commissions proposals and claimed the 2012 ambition for the earnings link was a “reasonable compromise”.
However some sections of the pensions industry have criticised the reforms. Pensions specialist Ros Altmann claimed the introduction of the NPSS could ultimately dumb the level of pension provision across the private sector.
“What is so dangerous is setting the employer contribution level which is so low - 3%,” she said. “We have seen with pensions time and time again the minimum becomes the maximum.”
David Harris, MD of TOR Financial weighed into the argument by claiming the NPSS “does not follow the very successful model such as Australia which has embraced full compulsion.”
In addition, an industry source told Global Pensions the DWP had yesterday been “frantically” ringing around the press departments of insurers asking them to not be too critical of the white paper. The source claimed the paper would offer “something juicy” for insurers.
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