A pensions industry body has called for the creation of ‘Super-Trusts’ or low-cost schemes joined by large numbers of employers to supplement the government’s National Employment Savings Trust due to be launched in 2012.
The National Association of Pension Funds (NAPF), which represents the interests of 1,200 UK pension providers, hopes to further reshape the country’s ailing industry by launching its ‘Fit for the Future – NAPF’s vision for pensions’ programme today.
Additional proposals include new legislation to encourage workplace pension provision, the launch of a single, independent pension regulator and a new form of basic state pension.
Joanne Segars, NAPF’s chief executive, said: “Our proposals are designed to create a pension system, which is fit for the 21st century. They increase the value of the state pension for everyone, radically reduce concerns over means-testing and increase the value and quality of workplace pensions.”
While the government’s 2012 reforms were a major step forward, she added, “our proposals complete the task”.
The suggested Super-Trusts would be set up on a regional, sectoral or national basis and be managed by a board of trustees. According to the Association, they could add as much as 30% to the eventual size of an individual’s pension due to economies of scale.
NAPF also called for reform of existing legislation covering employer-sponsored private pension schemes to provide organisations more flexibility when designing them.
The statutory minimum contribution outlined in Nest of 8% of pay – 3% to be paid by employers, 4% from employees and 1% by the government – should likewise be raised to 11%. NAPF was ambivalent as to who should meet the additional contributions, however, arguing that such issues would be clearer as Nest bedded down.
But the organisation also outlined the case for a single pension watchdog, combining the current roles of the Pensions Regulator and the Financial Services Authority. A Retirement Savings Commission should likewise be set up to act as a permanent advisor on whether the UK’s pension system was fit for purpose.
Finally, NAPF suggested the launch of a ‘Foundation Pension’, which would combine the existing basic state pension and the state second pension. These are worth about £8,000 each year in today’s money and would pensioners an additional £25 per week, while also taking about two million of them out of the means testing system.
Such an initiative would be funded by a range of measures such as an increase in national insurance contributions and raising the official retirement age to 70 rather than 68 by 2046 as proposed by the government. Fringe benefits such as free bus passes for over 65s would also need to be restricted and means testing for winter fuel payment entitlements introduced.
