UK - Mercer Human Resource Consulting has called for a radical overhaul of the UK's pension regime just days before Alan Pickering's Simplification Review is to be published.
Pickering’s recommendations - due out tomorrow - are expected to include reducing red-tape; offering incentives for both employers and employees, and making non-expert trustees more independent. But Mercer says that the report is likely to “fall short of radical reform”.
Mercer criticises Pickering’s review - along with the Sandler and Inland Revenue reports - for failing to address the fundamental issue of rising pension costs due to lower returns and increased longevity.
Senior consultant and actuary at Mercer Deborah Cooper said: Until the government addresses the basic needs of the population over state pension age, and restores the incentives for long-term saving, pension provision in this country will continue to wither.
Mercer proposes a combined basic state pension and state second pension into a single flat-rate, integrated pension increased in line with earnings. Contracting out would be abolished and the Minimum Income Guarantee and Pensions Credit scrapped - payable only to those generations now in or near retirement. Mercer has also called for clearer roles for state and private sectors in providing pensions, and to give employers clear incentives to make retirement provision for employees
Mercer also attacked the plethora of state retirement benefits - the Basic State Pension, SERPS, State Second Pension, Minimum Income Guarantee and Pension Credit - saying that they only added to the current confusion.
Cooper added: The new State Second Pension addresses some of the problems of SERPS but at the cost of such complexity. ... The Minimum Income Guarantee only meets about 70% of a person’s basic needs in retirement and, furthermore, about half a million eligible pensioners are not drawing this benefit.
By Madhu Kalia
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