UK - Occupational schemes would get a major boost if radical plans to introduce a new universal protected pension are enacted, industry experts claim.
The Pensions Reform Group’s (PRG) plans call for National Insurance contributions to rise from 10pc to 15.25pc for all employees over the age of 25. This would provide a pot which, with the basic pension, would enable people to retire on a pension equal to a third of average earnings - about £7000 in today’s money.
These proposals would also mean that any extra pensions provision provided by company schemes would not simply replace government’s mean tested benefits.
Both the National Association of Pension Funds and the Association of British Insurers have welcomed the report and said it would make a valuable contribution to the debate on the future of pensions in the UK.
Both bodies are to play an active role in the forthcoming consultation period.
PRG chairman Frank Field MP said in the report: “The universal protected pension will allow employers to pay into employees’ pensions confident that those contributions will not be made instead of means tested benefits.”
The Liberal Democrats said a good incentive for employers to provide benefits to lower paid workers was needed, and it would not help if company pensions are simply replacing benefits.
Liberal Democrat welfare spokesman and PRG member Steve Webb said: “The report is important because it highlights just how underfunded many people’s pensions are. We want employers to be contributing to pension schemes but there is an increasing danger that they will think ‘what is the point?’ as they are just saving the state paying some means tested benefit.”
This report follows earlier similar proposals put forward by Field but discounted by the Treasury as too costly.
The PRG proposals are to be open for consultation for the next six months with comments being sought on how this new scheme would be governed and also how it would fit alongside existing occupational schemes. A revised report will be published at the end of the consultation.
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