US - Vice president Richard Cheney has hit back at critics of the proposed US pension reforms, claiming a failure to act now would leave taxpayers to foot the bill.
Strong reforms were the only way to avoid many more citizens losing out on pensions, Cheney said in response to criticism that the reforms were “too severe”.
Speaking at the National Retirement Saver Summit, Cheney claimed the “strong and sensible” reforms proposed by President Bush would ensure all pension promises were kept.
Under the proposals, companies would be required to accurately determine and report the financial status of their pension plans – both their assets and their liabilities – and ensure they would be in a position to fulfil commitments to their workers, he said.
“Companies that underfund their pensions would be given seven years to catch up and get into a position where they can assure employees that they've taken all the necessary steps to safeguard those pensions,” said Cheney. “Our experts have studied the Congressional proposals carefully and they are convinced that unless the bills are strengthened, there will be an even greater risk that workers will lose benefits, and that taxpayers will be asked to bail out the pension insurance system.”
At the same conference, Iowa senator and committee on finance chairman Chuck Grassley called for initiatives that encouraged Americans to save more for their retirement.
Recent data on national savings showed the nation’s savings rate was at a record low, he said: “One key way to [promote saving] is by not punishing those who save and invest through punitive tax rates.”
Grassley said lower rates on capital gains and dividends enacted in 2003 had spurred economic growth, investment, and tax revenue. “It is critical that we foster a “savers’ society” by extending capital gains and dividends tax relief,” he said.
“It is also critical that we have rules and incentives in place to foster the sponsorship of employment-based retirement plans.”
By Damian Clarkson
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