UK - Watson Wyatt is urging the government to scrap contracting-out and increase the age of retirement to 67.
The consultant set out its own “wish list” ahead of the Green Paper on pensions which is expected to be released by the department for work and pensions around Chancellor Gordon Brown’s pre-budget statement this coming Wednesday.
Watson Wyatt believes the government document should include:
- No compulsion for pensions saving with employers free to determine the benefits which their schemes will provide.
- A simplified tax regime governing occupational and private pensions.
- Additional means of providing security for members’ benefits when a scheme is terminated.
- Pension provision to be supported by a political consensus and protected by an independent regulator.
- A flat-rate state pension, indexed in line with the growth in the economy.
- The abolition of both contracting-out and a state second tier pension.
Watson Wyatt partner Colin Singer stressed that any reform must avoid quick-fix solutions and employ long-term strategies.
He said: “The problem with pensions planning is that it takes several generations to bear fruit and these days it seems almost unthinkable to set a policy that will remain intact for 40 years.
“For this to be achieved, the much-vaunted ‘public-private’ partnership, which the government espoused at the beginning of its first term, will need to become a practical reality.”
Mercer Human Resource Consulting partner Ian Eggleden backed all of Watson Wyatt’s “wishes” but expressed concern at its proposal to protect members’ benefits.
He said occupational scheme “safety” measures had been discussed in the past and universally rejected as impractical.
Eggleden – who is president of the Pensions Management Institute – added that the government should also clarify what happens to employer debt on wind-up and the priority orders when paying out.
He added: “There is an opportunity for the government to change the face of pensions for future generation of pensioners. If they don’t take it they will regret it.”
The Pensions and Lifetime Savings Association (PLSA) is in the process of convening an industry-wide group to take forward the work of the Institutional Disclosure Working Group (IDWG).
The Transfers and Re-registration Industry Group (TRIG) has given its support to an initiative which aims to complete occupational pension transfers within three weeks.
Scottish Widows has completed a bulk annuity deal for the Hitachi UK Limited Pension Scheme.