UK - PricewaterhouseCoopers has called on the government to pour £1000 a year in National Insurance revenues into a new savings account, coupled with improvements to the Basic State Pension, as a solution to the UK pension crisis.
PWC said the new government-backed savings account would convert the state second pension into a notional defined contribution (NDC) approach along the lines of that seen in Sweden and Italy. The account would purchase a pension on retirement.
The proposals were flagged in a recent PWC paper - UK State Pension reform 2005.
“Our proposals build on the strengths of the current UK state pension regime, while also drawing on practice in a number of European countries,” said Trevor Llanwarne, chief actuary for pensions at PWC. “We achieve this by giving significant attention to transition and minimising winners and losers along the way.”
The paper advocates increasing the basic state pension by an amount “significantly in excess of inflation” and ensuring that the total state pension rises at a faster rate than the minimum income guarantee, which determines pensions credit eligibility.
“The proportion of pensioners relying on means-tested benefits would therefore decline gradually over time, rather than rising steadily under the current indexation regime,” PWC said. “Under the proposed new regime, an individual could therefore confidently expect not to be reliant on means-tested benefits in retirement from 2027 onwards.”
Llanwarne added: “Through a variant of the citizen’s pension approach, poverty and fairness are tackled. Savings are given a kick start and sustainability is delivered through the inherent flexibility and cost-effectiveness of what is a much simpler and more easily understood system going forward.”
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