Employers’ organisation the CBI have warned that the UK cannot afford a flat rate citizens’ pension; one of the current government proposals designed to plug the UK’s yawning pensions gap.

The proposed citizens’ pension would be much higher than the current basic state pension, paid to everyone regardless of their National Insurance contribution history and would mean the end of the state second pension.

CBI Director-General, Sir Digby Jones called supporters of the universal citizens’ pension ‘well meaning’ but criticized their views as ‘missing the point’.

The problem, he said comes down to funds:

“A much larger state pension is unnecessary for everyone and frankly the country can’t afford it.

“Those expecting to rely on the basic state pension alone face the prospect of an unacceptable drop in their living standards after retirement. But by no means every future pensioner is in that position.”

The solution, say the CBI is to gradually increase the basic state pension but only to the level reached when the pensions credit is paid. Entitlement should continue to take account of contributions history and an earnings related second state pension should be kept for those without an occupational pension.

Digby Jones added: “The real challenge is to encourage those who can afford to save more for themselves, and to provide more support for those on lower earnings who will struggle to save enough for an adequate pension.”

The CBI’s key recommendations are:

• Save more: employers that can afford to contribute to pension schemes for staff should do so while new staff should automatically be enrolled in a pension scheme




• Boost incentives for firms to save: government should reduce regulatory and cost burdens on schemes. For SMEs an employer tax credit, access to free independent financial advice, a new Partnership Pension or seed corn funding for schemes in specific industry sectors should be considered.




• Raise the level of the Pensions Credit: to reduce the need for means testing and help low paid workers.




• Retain the government-provided earnings-related second state pension




• Raise the state pension age to 70 between 2020 and 2030

The TUC has told the Pensions Commission that compulsory savings must be part of any solution to the growing pensions crisis.

In their submission to the Pensions Commission, they are calling for a new compulsory savings regime to be run by a body modelled on the Low Pay Commission and involving unions, employer representatives and independent experts.

The union body say that workers need to save 15% of their income to provide a decent pension; under their proposals bosses would provide 10% while workers would save 5%.