UK - Second tier pension schemes have distorted private sector provision in the UK and should be abolished, consultant Watson Wyatt claims.
In its response to the government's simplification review, the consultant says that SERPS and the State Second Pension (S2P) have been a prime reason for employers to move away from defined benefit schemes.
Watson Wyatt says the second pension has caused the government to impose extra requirements on occupational schemes which have gradually pushed up the cost to employers over the past 20 years.
Partner Colin Singer said: “SERPS, and now the State Second Pension (S2P), are a form of compulsion and give the state the opportunity to impose its preferences on private sector pension provision.”
Watson Wyatt also noted that increasing government interference has led to employers being forced to offer a benefit guarantee that it cannot control.
Singer added: “This may well be an example of the ‘principle of unintended consequences’. The time has come to reappraise the principal role of the state and ensure there is a clear separation between state and private pension provision.”
By Jonathan Stapleton
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