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

Monday, 28 February, 2005

Pension reform tests are unveiled

Pensions is now high on the political agenda

The government has made what it says is the first step towards pensions reform by publishing the key principles which will underpin changes.

Publishing the principles for reform, Mr Johnson said the full impact of the "ageing society" would not be felt for two decades and the burdens on future generations had to be recognised.

"Various organisations are putting forward very different proposals for pension reform," he said.

"We must engage seriously with all of these, but as yet there is no consensus on the detailed way forward.

"As a first step, I'm today outlining principles for pension reform which should give us an agreed framework in which to evaluate all the options and define a way forward."

The principles are:

The pensions system must tackle poverty effectively

The opportunity to build an adequate retirement income for all

Public pensions provision must remain sustainable

Fair outcomes for women and carers

A better understood system

To go forward, where possible, in consensus.

The government says it will look at questions such as basing pensions on residence rather than time in work.

The Lib Dems say that idea would mean women who take time off work to have children are not at a disadvantage.

Mr Johnson's new document also says ministers will examine whether new collection methods could make it easier and cheaper for people to save.

Tuesday, 22 February, 2005

ABI announced fall in personal pension savings

The annual survey of the Association of British Insurers show that saving in stakeholder pensions fell from £298 million in 2001 and £423 million in 2002 to £272 million last year, a £35 million year from 2003.

Premiums paid in to all individual pensions fell from £2.4 billion in 2001 to £1.86 billion last year, a fall of £6 million on 2003. Politicians are blaiming Gordon Brown's love of mean testing for deterring people from saving.

Savings in personal pensions fell to £324 million last year from 599 in 2001, while savings in self-invested pension plans (Sipps) halved from £4 million in 2001 to £2 million.

However savings in employer-sponsored stakeholder pensions has risen slightly on from £365 million in 2003 to £388 million. This is in contrast to the £448 million that was saved back in 2002.

A Treasury spokesman said: "The Treasury welcomes the growth in employer-sponsored stakeholder pensions and Group Personal Pensions reported by ABI."

"It's too early in the lifetime of stakeholder pensions to draw any conclusions about the long-term shape of the market", he went on to say.

A recent survey by Legal & General, looking at people's attitudes towards saving gives some hope for the future as 59 per cent of the 4,700 people surveyed said they were "in the mood to save."

Friday, 18 February, 2005

Unfunded public sector pensions approach £700 billion

Acturial consultants Watson Wyatt estimated today that unfunded public sector pension liabilities will reach £690 billion in March - more than one-and-a-half times the £417 billion level of public sector debt.

The figure is 60 percent higher than the latest estimate of public sector pensions liability of £425 billion, supplied by the Government's Actuary Department in March 2003.

78 per cent of the estimated liability is taken up by the Teachers, NHS, Civil Service and Armed Forces pension schemes, whose members number some 3 million, or 10 per cent of the work force.

Talks between Deputy Prime Minister John Prescott, the unions and employers ended after four hours on Thursday without agreement.

Amicus, one of Britain's biggest trade unions, said that new public sector employees "would face average pension losses of between 25 per cent and 27 per cent, with local authority employees worst affected", as a result of government plans to raise their retirement age from 60 to 65.

Tuesday, 15 February, 2005

Alert sparks dash back to second pension

ALMOST 90,000 people rejoined the state second pension (S2P) after Britain's largest insurers warned customers to reconsider their move to opt out of the government system.

In a further boost to the S2P, Resolution Life said that it would automatically move 50,000 policyholders back into the state system. Yesterday, Britain's biggest insurers said that thousands of customers had rejoined the S2P.

Most were prompted by letters from all UK insurers in November.The insurers were concerned that the rebates offered by the Government to contract out of the S2P were not sufficiently valuable to justify leaving the system.

Norwich Union, Britain's largest insurer, said that 26,500 of its 265,000 policyholders had decided to rejoin the S2P. Prudential automatically moved male policyholders aged over 60 and females aged over 54 -about 5,000 people in total -back into the S2P. About 20,000 policyholders who received letters from Legal & General had rejoined.

Standard Life said that it was sending a second letter to policyholders, asking them to reconsider their decision to opt out of the S2P. About 37,000 policyholders rejoined the S2P after receiving its first letter last year.Resolution has ended its pursuit of HHG's closed life funds, the group said yesterday.

HHG ended discussions with Resolution last week, after the rival bidder Hugh Osmond, the entrepreneur, agreed to pay an extra £45 million on top of his £1 billion offer for the funds.

Thursday, 10 February, 2005

Parities warned over grey vote

Political parties cannot afford to take older UK voters for granted in the coming election, says Age Concern. A survey for the charity suggests 69% of over-55s say they always vote in a general election compared with just 17% of 18 to 24 year olds.

Charity boss Gordon Lishman said if a "decisive blow" was struck at the election it would be by older voters who could be relied on to turn out.

A total of 3,028 adults aged 18 or over were interviewed for the study.

Mr Lishman urged the next government to boost state pension.

He also called for measures to combat ageism and build effective public services to "support us all in an ageing society". "Older people want to see manifesto commitments that will make a difference to their lives," Mr Lishman said. "Political parties must wake up to the fact that unless they address the demands and concerns of older people they will not keep or attract their vote."

In the survey carried out by ICM Research, 14% of people aged between 18 and 34 said they never voted in general elections. Among the over-65s, 70% said they would be certain to vote in an immediate election, compared with 39% of people under 55.

Age Concern says the over-55s are "united around" key areas of policy they want the government to focus on. For 57%, pensions and the NHS were key issues, while the economy was important for a third, and tax was a crucial area for 25%.

Tuesday, 8 February, 2005

Clash between CBI and Institute of Directors

BRITAIN'S TWO largest lobby groups for business have clashed over the issue of whether there should be a compulsory retirement age. It happened as industry groups submitted their proposals to the Pensions Commission, the body set up by the Government to help solve the country's pensions crisis.

The Institute of Directors (IoD) said the UK's looming pensions problems could be stalled by ending forced retirement at a certain age. Three- quarters of IoD members said they opposed staff being forcibly pensioned- off. This goes against the long-standing view of the CBI, which believes that company retirement ages give employers and staff certainty over their pension arrangements and end any disputes over whether someone is fit to work or not.

Business and pensions industry groups have been responding to a report by Adair Turner, who was asked by the Government to review the UK's pension regime and assess whether further compulsory saving is necessary.In his initial report, which was published last October, Mr Turner warned that the country faced tough choices between raising taxes, savings or retirement ages if it wanted to stop pensioners becoming poorer relative to the rest of society in the future.

Mr Turner said that unless the current balance of state benefits and voluntary saving changed, millions would face a bleak retirement.However, little in the way of real consensus is emerging on what these changes should be.

The CBI, for example, is against the idea of establishing a flat-rate "citizens' pension" which would give a higher state pension to everyone.This idea has been championed by the National Association of Pension Funds (NAPF), which believes that it would eradicate the need for a complex, double layer of state benefits.

Christine Farnish, of the NAPF, said in the association's response to Mr Turner's report: "If we had a decent universal state pension, the debate over further compulsion would fall away. Incentives to save could be streamlined and there could be significant deregulation of private retirement savings, which would bring down costs."

The concept of a citizens' pension has also garnered favour with politicians, but Sir Digby Jones, the director general of the CBI, said the UK "cannot afford a flat rate pension for all". The CBI believes that the basic state pension does need to be increased, but on a gradual basis and only to the level that would eliminate means testing.

The Association of British Insurers (ABI) also wants to establish a "virtuous circle" of better incentives for employers and individuals to contribute to pensions, as well as financial advice that is more readily available. The ABI told Mr Turner's team that compulsory pension saving should be considered only as a last resort.

Trade unions have said the voluntary pension system has failed and that people must be forced to save more to boost pension provision."People need to save 15 per cent of their income to provide a decent pension and in a new compulsory system, employers should provide 10 per cent and employees 5 per cent," the TUC said in its submission.The Commission will now evaluate the responses it has received and will produce a second report in the autumn containing recommendations to the Government on how to improve the system.

Friday, 4 February, 2005

The Pensions Reform Group makes the case against a Citizenship Pension

"Who could be against a Citizenship Pension? More women than men draw an incomplete state retirement pension and the Citizenship Pension is being presented as the most effective antidote to pensioner poverty. A careful analysis of the Citizenship pension however suggests that the disadvantages of this reform far outweigh its advantages,"

said Frank Field, Chair of the Pensions Reform Group at February 3rd's Politeia seminar – A Policy for Pensions: Prosperity and Security in Retirement.

• Unfairness: The vast majority of people with incomplete insurance records, leading to a partial state retirement pension, made the decision they did not need to work, or, if they did, they would pay a much reduced N.I contribution. To award this group a full pension, when other women paid what was called the full stamp and often voluntary contributions to make up a complete insurance record, flies in the face of justice. Those who have paid a full contribution will resent that their own efforts should be discounted in this way.

• Attacks the something for something culture: A corner stone of British welfare is that people gain benefits because they have made contributions. That principle has already been severely eroded by the massive extension of means-tested benefits. Ignoring an individual's contribution for the state retirement pension could be a death blow to the insurance principle and all that that entails.

• Undermines savings: Advocates of the Citizenship Pensions suggest that the National Insurance rebate, currently used by individuals to invest in a funded pension scheme, should be largely diverted to pay for a higher state pension. If this proposal goes through it will make it nigh impossible for the Government to achieve its objective of reversing the current 60:40 ratio of pay-as-you-go to funded pension provision in this country.

• Represents a significant increase in National Insurance contributions: A significant part of each person's National Insurance contributions goes either to the State Second Pension (S2P) or, more commonly, into a company or private scheme providing a funded pension. Many voters, and particularly young voters, do not believe that the existing pay-as-you-go state retirement pension will have survived their advent into retirement. To divert the National Insurance rebate from funded provision to finance current pay-as-you-go pensions will be seen by most of today's workers as a significant increase in their National Insurance contributions from which they are unlikely to benefit from in the future.

• Underestimates the success of Pension Credit: There are severe long run disadvantages associated with Pension Credit. In particular, it builds a powerful disincentive to save. In the shorter run however Pension Credit has been successful in reaching the poorest pensioners who are largely women with incomplete insurance records. The official data probably significantly underestimates the Pension Credit's success.

Frank Field concluded:

"It is difficult to see a Citizenship Pension as an effective let alone a longer term solution to Britain's pension's crisis. Today's workers, who are called upon to finance today's pay-as-you-go state retirement pension, do not believe that this is a secure means of ensuring that they have an adequate pension when they come to retire. While a Citizenship Pension has a superficial attraction it also diverts attention from debating the serious hard options which have to be embraced if a successful long term reforms of pensions is made in this country."

The panel for the seminar on February 3rd at Politeia also included: Chris Daykin HM Government Actuary, Paul Thornton, The Senior Partner, Watson Wyatt LLP, and David Willetts, MP, Shadow Work and Pensions Secretary.