The CBI has told ministers that the state should play a key role in providing a low-cost savings system for people on low and modest salaries, that could lead to far more generous pensions.
The business group says the government should revamp the second-tier state pension, a means-tested pension which provides additional income for people whose retirement savings leave them at or near poverty.
John Cridland, CBI deputy director general, said: "A serious gap in UK pension provision exists among lower earners and staff in some smaller firms.
"The best way to plug this gap is to revamp the second state pension so help is offered to those who need it most."
Stakeholder Response: Help the Aged
Reacting to the news that the Confederation of British Industry wants to see the second state pension reformed in favour of lower earning employees, Mervyn Kohler, head of public affairs at Help the Aged said:
"News that the CBI has entered the debate around reform of the complicated second state pension is to be welcomed.
"Help the Aged has long argued that the current package of a basic state pension, topped up with a second state pension fails to protect low-paid workers - and women and carers and others with intermittent working careers - from poverty in retirement. This situation is exacerbated by the sheer complexity of the current system, which acts as a disincentive for many people to actually save for retirement.
"The CBI's statement is a positive step, and shows how much new commitment and effort is required from government, but Help the Aged has urged that the vital first step is to see the basic state pension improved and linked to earnings. Reform of the second state pension alone will not address the scandal of pensioner poverty, whereas increased investment in the basic state provision would make an enormous and lasting difference."
