The government should provide all British citizens with a basic state pension regardless if they have worked or not, says the National Consumer Council.
Latest research by the NCC, entitled 'Retirement realities: Shocked and struggling' , reveals many people on their way towards retirement feel "let down" and "disillusioned" by the pension they will receive from the state.
To rectify this, the NCC believes the government has to introduce something that would ensure people of an adequate, secure and simple base for their retirement finances.
Ed Mayo, NCC chief executive, says: "This is not just about money in the pocket. Most of those approaching retirement feel that their hopes and dreams are being taken away. In dabbling round the edges of the pensions crisis, the government is risking a backlash."
Currently, people need to have an unbroken work record from the age of 20 to retirement age if they would like to receive the full basic state pension.
The Council says this system is "outdated, complex and unfair" as it does not work for people with gaps in their work history or for people in part-time jobs. Women, in particular, is losing out from the system, with only one in two qualifying for a full state pension compared with nine in ten men.
"Giving everyone the right to an adequate basic state pension - a 'citizen' pension, if you like - regardless of their work record, should be considered seriously by the government as a step towards solving the pensions crisis," Mayo says.
He adds that this could also help restore people's confidence when it comes to pensions. "A reduction in means-tested pension top-ups would help cut some of the crazy red tape. A universal 'citizen' pension would be more cost-effective than expensive tax wheezes that mainly benefit wealthier people. This could do a lot to re-build public confidence in pensions."
Besides introducing a universal pension benefit for the UK population, the NCC believes following steps should be taken:
- Government should provide better and simpler incentives for people to save - for example, an individual pensions voucher, or matched savings, instead of the unfair system of tax relief
- Government, employers and the financial services industry should work together to provide people with more security and a sense of partnership that would encourage people to save for their retirement
- The FSA should make pre-retirement advice a priority in its financial capability strategy, and government and industry should provide adequate funding to make this a reality
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