State pensions must be reformed to help women and poorer people in particular, Stephen Haddrill, director general of the Association of British Insurers (ABI), said on Monday.
Speaking at a Labour Party conference fringe meeting, Hadrill said the basic state pension needs wholesale reform because “two-thirds of pensioners are women, but income in retirement is less than two-thirds that of men.”
“The current rules, at worst, effectively penalise caring – that’s both bad social policy and bad for the economy,” he added.
Hadrill said the State second pension (S2P) also needs reviewing. He believes the poorest should be targeted most by making S2P flat rate at £15,000 salary.
Further, Hadrill stated: “The decision on contracting-out should be made clear cut by increasing rebates and making them earnings-related.”
He argued state pensions and private sector savings should be linked together by reforming contracting-out so aggregate saving is boosted and long-term public expenditure pressure is reduced.
On employee pensions Hadrill said: “The power of the workplace needs better to be harnessed to enhance saving. Auto-enrolment is the key to this – it both captures the apathetic and protects those who genuinely can’t afford to save now.”
He said the insurance industry and government need to work together to increase demand for pensions and savings by building upon Informed Choice and accelerating financial capability programmes.
Finally, Hadrill believes steps should be taken to help people work longer if they wish by reforming the annuity regime and making sure the labour market works for older people.
“But we mustn’t make the mistake of penalising the poor by increasing the State Pension Age,” he added.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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