UK - The Trades Union Congress (TUC) plans to step up its campaign for extending compulsion in pensions provisions later this month when it debates a report from its pensions task group at its Brighton Congress.
According to a TUC statement, the report notes that while compulsion is not new for UK pensions, new elements need to be introduced to make up for the decline in pension coverage in the workforce.
The report focuses on the need to reinstate a target similar to the state second pension (S2P), formerly SERPS, which was set up with the aim of providing half pay on retirement for average income earners and a bigger proportion for low income earners.
“The failure of successive governments to uprate the state retirement pension and cuts in SERPS mean that this target is no longer met,” the TUC statement said.
“The TUC report says the key question is how to extend compulsion to restore a similar target.”
Meeting this requirement involves working lifetime contributions of about 15% of pay and the report says this should be comprise a minimum of 10% paid by the employer, and 5% by the employee, TUC says.
The new requirement should be phased in over a number of years with the added costs being partly met by absorbing the current costs of a second tier pension (the S2P), it added.
TUC general secretary Brendan Barber (pictured) said: “Many people at work today have no idea how poor they will be when they retire. That’s why we need a new pensions settlement – it should meet the long established goal of a decent income for all, but deliver it through a modern system based on lessons from countries such as Australia and Denmark that have pioneered this approach.”
Barber said while employers would complain, “all this says is that those who employ the half of the workforce without a decent pension should catch up with the other half who do”.
Suggestions on how compulsory contributions could be used to provide pensions include: a revitalised state second pension, new salary related schemes, possibly related to average earnings rather than final salary, and money purchase schemes such as stakeholders.
The report points to the advantages of a state scheme as providing security and flags a combination of a new state second pension and either a money purchase or salary related pension as the best option.
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