A permanent Pensions Commission should be set up to oversee the future of the UK pensions system and promote consumer confidence claims the Trades Union Congress (TUC).
In its response to the Pensions Commission report published at the end of November, the TUC also gives its backing to the idea of a National Pensions Savings Scheme (NPSS) as proposed by Adair Turner, but expresses some concerns over the industry alternatives.
It is particularly in favour of compulsory employer contributions, a restored link to earnings when increasing the state retirement pension, and a universal, rather than contributory, state pension which would provide particular help to women.
But it adds any alternative model to the NPSS, including those proposed by the Association of British Insurers (ABI) and the National Association of Pension Funds (NAPF), would have a potential negative impact on individuals, some employers and the self employed.
In its report, the TUC details four main arguments against an alternative, which include questioning the industry’s ability to deliver low cost pensions for lower and middle income people, and pointing out an alternative model could make it difficult and more complicated for those taking time out of paid employment and the self-employed to participate.
The TUC also says there are questions over how the pensions industry would be able to provide good governance which is independent and represents the best interests of the members.
As a result, part of the TUC’s response suggests a permanent successor to the Pensions Commission should be established, which is above the day-to-day pressures of party politics, in order to rebuild people’s trust in pensions.
It says the new body should report to Parliament every four years including both research and recommendations to Government, including the facts and potential policy changes which might be required.
The TUC agrees with the current Pensions Commission there is a need for a clear division of roles between the state and individuals, and that the new settlement on pensions should be communicated clearly and openly to people, so that once agreed the system should become reasonably stable over time.
So the TUC is suggesting the Government establish an independent body with features similar to the Low Pay Commission, as part of their Pensions Reform White Paper scheduled for May.
Brendan Barber, general secretary of the TUC, says the Pensions Commission proposals make sense, as in particular they offer a new deal to women and the increasing number of private sector employees who no longer have access to a decent scheme.
He says the one major disagreement is the TUC remains opposed to increasing the state pension age as it will hit the poor and those with stressful or physical jobs.
Barber adds: “The future of pensions is now a big political test for this Government. We do not underestimate the strength of the employer and industry lobbying that is trying to get ministers to scrap compulsion or increase costs to give pension companies a cut of a guaranteed market.”
But he points out Adair Turner and his colleagues have won the intellectual argument for their proposals, and the Government should make it clear they will implement them and then establish a broad but independent Pensions Commission which can help ensure a continuing consensus.
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 Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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