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The scale of the pensions crisis has been underlined by conflicting advice about the solution to the pressing issue of retirement income.

As the Turner review into pensions continues to take evidence, both the CBI and the TUC released their submissions on Monday.

Business is warning that the UK cannot afford unions' call for a flat rate citizens' pension for all.

Party Response: Conservative

A spokesman for the Conservatives said: "After eight years of Labour, pensions are verging on collapse. Thousands of schemes are closing and millions of people forgotten by Mr Blair will retire without adequate pension plans. We agree with the CBI that the idea of a flat-rate citizen’s pension is not the answer to the pensions crisis. It would not address the root cause of the problems and it destroys the contributory principle, whereby people earn the right to a state pension.

 

"The CBI confirmed the need for what Conservatives have been proposing all along – proper support of company pensions and new incentives to save. Conservatives will support company pensions by reducing the restrictive regulations surrounding them and help them to deal with long-term risk.  We will also create a new ‘Lifetime Savings Account’ to help people save more for retirement. When people save themselves, the government would add to their contributions. And we will give people the secure foundation of a better state pension to help pensioners off means-tested benefits. Only the Conservatives have the policies to tackle the pensions crisis."

Stakeholder Response: Institute of Directors

Miles Templeman, director general of the Institute of Directors, said: "We all know that demographic changes will radically affect our pensions position. Abolishing a compulsory retirement age could certainly help in easing the problem. From our research there seems to be a genuine belief amongst employers that many of their staff will want to work for longer than the current law allows. Ultimately, what we need most of all is flexibility in the system.

 

"Ending compulsory retirement is only one of a number of reforms necessary to ensure adequate pension provision in the future. Of equal importance would be a radical simplification of the whole pensions system, enhanced employee and employer contributions and increased tax incentives for pensions funds.

 

"Employers are very keen to tackle the whole pensions crisis. Partly out of responsibility to their employees but also because they, as individuals, will be affected in the same way as their staff. Our research shows that two-thirds of directors are on the same pension scheme as their workforce. The IoD is currently undertaking a wide-ranging consultation exercise with members on reform of the UK pension system which will result in a major report on pension provision, incorporating specific policy proposals, to be published in April 2005."

 

Stakeholder Response: Help the Aged

 

Mervyn Kohler, head of public affairs at Help the Aged, said: "Help the Aged agrees with Adair Turner that our chaotic and ailing pensions system needs addressing on three fronts: Simplifying the state scheme, boosting additional private saving and encouraging more people to work a bit longer.

 

"The idea of a citizen's pension is rapidly gaining support as part of that second area of action. The level at which it is set should reflect a decent standard of living and lift pensioners off a dependency on means-tested benefits - which are inefficient as a way of delivering help to people who need it most. Whether that is affordable is a matter of judgement. Help the Aged believes it is.   But action is required in the other two areas too."

 

Stakeholder Response: Investment Management Association

 

Richard Saunders, chief executive of the Investment Management Association, said: "When discussing the problem of retirement provision it is equally important to look at the issue of how to encourage long-term savings and the future of the successful Individual Savings Account (ISA), as it is to look at the state pension scheme, increased longevity and the reduced levels of contributions to occupational schemes. Now more than ever before is there a real need for personal saving to complement any state provision for retirement.

 

"Many people find pensions difficult to understand and, when they do, are reluctant to tie up their money for decades in a pension fund. In contrast, the ISA has proved a simple and accessible way of saving for the longer term and has had great success in encouraging those lower down the income scale to save. 

 

"Therefore, news of the government's consultation on maintaining the current maximum ISA limits at £7,000 for equities and £3,00 for cash is warmly received. However, the future of the ISA brand itself is not secure due to a "sunset clause" introduced at its inception that gave it a shelf life until 2009. This is due for review next year, which will provide the ideal platform for the government to commit to what is a key component of the UK's long-term savings framework.

 

"Indeed, the IMA believes that the ISA can form a cornerstone of an integrated and simplified savings framework. The current plethora of savings options that exist need to be brought together to offer a seamless approach to long-term savings, incorporating under one tax regime child trust funds, ISAs, stakeholder products and pensions."

 

Stakeholder Response: Association of Consulting Actuaries

 

A spokesman for the ACA said: "The ACA has responded to the pensions commission report supporting a higher basic state pension, where the current basic pension and state second pension are merged into one payment. This consolidated basic state pension - sufficient to meet essential basic living costs - would be paid at a later age, with the higher age phased in over a number of years.

 

"This would dramatically reduce the need for means testing. Because the contracting-out terms are no longer favourable and to simplify pensions, the ACA also favours the abolition of contracting-out, with private pensions built on top of the consolidated state pension. The ACA also favours incentives (by way of lower National Insurance contributions) being given to employers who provide private schemes that meet a certain standard, with employers also being able to adjust scheme rules retrospectively to avoid increases in cost due to longer life expectancy. 

 

"The ACA says that if these state and private reforms are vigorously pursued, there would not be a need for compulsory pension contributions. Indeed, if compulsion is introduced there would be a real danger of contributions being levelled-down to whatever minimum might be set. "     

 

Stakeholder Response: Business Services Association

 

Norman Rose, director general of the Business Services Association, said: "Clearly the problem of ensuring adequate pensions provision for UK workers is one which should concern us all. We need to ensure that none of our employees suffers hardship on retirement and it is the role of a state pension to provide adequately for moderate security for all in retirement.

 

"I believe that there is a level of earnings below which it is not reasonable to expect that individuals and families will have the ability to save usefully for their retirement.  It is the duty of the state to care for these low earners and we need to take a realistic view of the resources available to them – the contributions they could afford to make are in any case likely to be insufficient to provide any meaningful level of retirement benefit.

 

"In my view, it would be more appropriate to provide the means to assist them to own their own properties, which in the long term would prove to be a better and safer investment. "The question is – can the state and taxpayers afford it?"

Published: Mon, 7 Feb 2005 03:15:00 GMT+00

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