UK - NAPF CONFERENCE: A reform of state benefits will provide the cornerstone to reviving the UK's ailing pensions system, Conservative spokesman for work and pensions David Willetts told delegates.
Willetts also proposed scrapping the £1.4m cap imposed on an individual's pension fund as part of a six point reform plan.
The Chancellor is tackling the wrong problem, he said.
The challenge is not to limit the amount of money people can have in their pension schemes. The challenge is the opposite - to encourage more people to put more money into pensions.
Addressing the conference in the absence of Andrew Smith, Secretary of State of Work and Pensions, Willetts cited figures showing that individuals were currently saving around £32bn, only a third of what is needed to avert a deficit in the public pocket.
On the £1.4m cap, he said that limit was likely to affect some 600,000 people and impose massive administration costs: The limit goes if all the company's employees are given access to the scheme on the same terms. We would also still need to keep some limit on the value of the tax-free lump sum.
He added: I don't mind fat cats as long as we also have fat kittens.Willets also cast doubt on the Government's projection of 5% of GDP for pensions spend by 2050.
He argued that numbers had been tweaked to exclude disability-, housing and council tax benefits. The Tories proposed reducing means-testing and redirecting money towards the basic state pension.
He argued that means-testing benefits does not reduce public spending if funded savings aren't there, estimating that pension spend is more likely to reach 10% of GDP by 2050.
Other points in the plan included:
-bringing in incentives and abandoning the contracted out rebate;-keeping individuals in schemes, unless they chose to opt out;-making it easier for companies to change the terms of their schemes to avoid closures;-changing the law to allow employers greater freedom to advice staff on pensions.
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