Welcome to the Pensions Reform Group

"The Universal Protected Pension we put forward is the only workable scheme that guarantees to break the link between retirement and poverty" - Chair of the Pensions Reform Group, Rt. Hon. Frank Field MP.

The Pensions Reform Group was established in 1999 with membership drawn from politics, industry, academia, voluntary bodies, and other stakeholder groups. Our joint endeavour is to begin a serious and detailed debate on banishing pensioner poverty from our shores.

Latest News & Updates

Sunday, 30 October, 2005

UK can learn from NZ

The New Zealand retirement commissioner has been in town. One of our major insurers thought UK politicians and its own industry might have something to learn from her. They were right. But, more interestingly, why does the New Zealand government want a retirement commissioner?

To view the rest of Frank Field's Pensions Week article please follow this link to the Press and Media page

Monday, 24 October, 2005

OECD Calls For Reduction In Complexity Of UK Pension System

The Economic Survey of the United Kingdom 2005 contains an assessment by the OECD of the main economic challenges facing the UK. With regard to pensions, the survey suggests that reforms should focus on reducing the complexity of the pension system and reducing reliance on means testing. The fiscal costs of such reforms could be partly met by raising the state pension age in line with increasing life expectancy and focussing tax relief for pension contributions on low and middle income earners.

The OECD says that current pension arrangements in the UK combine one of the lowest state pensions in the OECD with one of the most developed systems of voluntary privately funded pensions. The main objective of the state system has been the prevention of poverty rather than providing a particular replacement income relative to pre retirement earnings. Unlike the situation in many OECD countries, future fiscal costs are not projected to rise significantly as the population ages. Instead concerns focus on the declining average public pension relative to the income of those in work; recent estimates suggest that state spending per pensioner is likely to fall by almost one quarter relative to average earnings over the next four decades if the current indexation conventions are followed. In addition, the level of private pension provision has been declining.

According to the OECD, a related weakness of the current system is that the number of pensioners who will be subject to means testing is likely to grow substantially which, while keeping fiscal costs down and targeting resources at those with the lowest incomes, will also increase the number of pensioners who will be subject to disincentives to private saving. By 2050 the survey suggests that over 60% of all UK pensioners could face a marginal tax rate of at least 40% on additional savings income. The complexity of the current state system may further reduce incentives to save because it is difficult to understand what the state will provide.

According to the OECD, considerable simplification could be achieved by reducing excessive reliance on means testing, particularly its projected growth in the future. This could be achieved by raising the basic state pension and indexing it to future earnings rather than prices. The fiscal costs could be partially covered by gradually raising the state pension age in line with increasing life expectancy, as well as by introducing a cap on tax subsidies to pension savings to better target tax relief at low and middle income earners where under saving is most pronounced.

The OECD says that reducing means testing would also facilitate reforms to promote other sources of income during retirement, such as through mortgage equity release products. There is a large potential for "house rich, cash poor" pensioners to make use of such products, although currently only around 1% do so.

The OECD also says that at a later stage, if there is no significant increase in saving for retirement, imposing some form of mandatory savings could be considered. This would be justified to the extent that individuals are myopic, although it might also force some individuals to save whose circumstances did not warrant it. It is also likely that there would be some offsetting fall in voluntary savings. However, such a step could not be taken if current means testing arrangements remained in place because it would clearly disadvantage those on low incomes.

In the meantime, the OECD suggests that a change which would stop short of higher compulsory saving would be to change employee participation in company pension schemes so that the default is that they are contracted in, unless they deliberately take a decision to opt out. Evidence from the United States suggests this should raise employee participation in company pension schemes.

Monday, 17 October, 2005

A golden opportunity exists to create 21st century pensions system

Steve Folkard, of AXA has, in a letter in today's Times newspaper, called on politicians to reform the basic state pension to make it a fairer and more viable way to safeguard the nation's future income.

The head of Pensions and Savings Policy, drew attention to recent research conducted by AXA which revealled that three quarters of Britons want the state pension to be reformed and to have a simplified system with a single unified pension to replce the current basic and second state pensions.

He also highlighted the need to draw a clear distinction between the role of the state and private sectors, and a recognition that people want control over their nature and timing of their move into retirement.

The PRG is proposing a reform to the basic pension which would ensure a pension of between 25 to 30 per cent of average earnings. By providing a secure building block for retirement, the Government steps back and allows the individual to make their own arrangements which reflect more accurately their own plans for retirement.

Wednesday, 5 October, 2005

Funded to fail?

Today Frank Field, Chairman of the Pension Reform Group, in a response to the PPF levy consultation, criticised the PPF for its decision to place a £300 million levy on companies with final-salary schemes.

Instead he proposes that payments should be made to by pensioners and workers in both the public and private sector as it is these individuals that have the greatest interest in a guarantee.

To view the press release that accompanied Frank Field's response, and the response itself, please follow this link to the Press & Media page.

Saturday, 1 October, 2005

Aon consulting warns of dangers associated with Citizen's Pension

Aon Consulting chief actuary Donald Duval has warned against introducing a Citizen's Pension, called for by the Liberal Democrats and the National Association of Pension Funds.

Duval said that, while the proposals were accompanied by calls for an increase in the state pension age, additonal funds would be requried from the private sector.

He went on to add:

"If does seem a little bizarre the NAPF proposing less private provisions, less funded provision and levies on people who have DB scehmes. The point is they want a bigger state pension and they don't believe the government will fund it out of taxation, so they are volunteering to finance it, very generously, from private pensions funds."