Ahead of Alan Pickering's review on pensions simplification due on Thursday this week, Mercer Consul...
Ahead of Alan Pickering's review on pensions simplification due on Thursday this week, Mercer Consulting has released a report outlining its arguments in favour of a flat-rate pension guaranteed without means-testing as a way to provide a minimum standard of living for all.
Under the Mercer plan, this £140 per week pension would be supplemented by a second tier of private pensions savings, preferably exempt from tax on employer and employee contributions to be most effective.
The third pillar of Mercer's answer is for additional wealth building through other types of savings, such as through home ownership or share ownership.
Taken together these measures would help deal with a problem that the government has mis-diagnosed, according to the report's author Deborah Cooper, a senior consultant and actuary for Mercer.
She says the reviews ordered, such as Sandler and Pickering, miss the central point, which is that the cost of pension provision is rising because investment returns are decreasing and people are living longer.
Raising National Insurance contributions and increasing the state pension age should be used to meet these higher costs as a better alternative to the problems associated with loading increased risk onto private schemes, Cooper says.
The measures would also incentivise employers to make contributions to a workforce that will be in work for longer.
The Mercer report blasts the Minimum Income Guarantee as a disincentive to save for lower income earners as it still leaves a 40% tax rate in the current regime, which perhaps explains the findings that "half a million eligible pensioners are not drawing this benefit".
It goes further and says the MIG and Pension Credit should be scrapped except for those already in or near retirement, while contracting out should be abolished in order to help clarify the roles of state and private pension provision.
Data quality is key
Granted leave to appeal the judgement