The CBI has criticised the Government's proposals for a citizens' pension, which is priced on residence instead of national insurance contributions, as an option the country can't afford.
In its submission to Adair Turner’s pension report, the CBI believes the biggest task facing Government is to provide a simpler system, aiding individuals on below average earnings who are not able to save enough for their own retirement.
The group believes in a solution of gradually increasing the state pension to the level reached when the pensions credit is paid, so as to reduce the need for means-testing, with entitlement continuing to be based on contributions history.
In order to fund this, the group argues for the state pension age to be increased over time to 70.
The universal citizen's pension, endorsed proposed by pensions secretary Alan Johnson as being a ‘really interesting’ idea deserving closer examination, would be far higher than the current basic state pension, which would also be scrapped as a result, according to the CBI.
Company director-general Sir Digby Jones, says: “Although well meaning, supporters of a universal citizens pension are missing the point. 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,” he says.
Jones adds Government efforts should be focused on encouraging both the young and low paid to get into a saving mindset, while also increasing the incentives for firms and their employees, particularly small and medium-size enterprises (SMEs).IFAonline
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