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
Tuesday, 29 March, 2005
Government publishes strategy on ageing society
Announcing the publication of 'Opportunity Age', Malcolm Wicks said:
"With statistics showing that by 2007 there will be more people over state pension age than aged under 16, the importance of this strategy is clear. Right across Whitehall Government departments are showing today their commitment to meeting the challenge of Britain's changing society.
"This paper is about shedding the stereotypes that surround our older people and instead ensuring that government can help people to live the lives that they want and deserve. This is not just about traditional issues such as pensions or care homes.
"It is about allowing people to work longer if they want to and ending the nonsense of good, able workers being thrown on the scrapheap just because of their age. To ensure people have access to education courses or sports clubs and giving people the independence and choice they want in choosing the services that they need."
The Government's key principles for Britain's future society are:
Age and employment - The Government's aspiration is for a million more older people in work, achieved not by forcing people to work longer, but by helping older people who want to stay in or get back to work. This will mean: legislating against age discrimination in the work-place; reforming Incapacity Benefit to support people back to work; and, giving the option of a lump sum, which could be worth up to £30,000 where people choose to take their state pension five years later.
Active ageing in the community - Promoting active ageing through such measures as free off peak, local area bus travel so that older people can get about, providing more financial support for those who want to study, and tackling fear of crime which can act as a barrier to social inclusion
Independence and security - Promoting services which support independence and well-being, such as extending individual budgets to older people so that those who need care or other support can have choice and control over their package of support instead of having one-size-fits-all services thrust upon them.
Saturday, 26 March, 2005
Pension poverty threat to young adults
Calculations done by Hewitt, the actuarial consultancy, found a 20-year-old who wants to retire with a yearly income after tax of £20,000 in real terms, must at least have begun to start saving £400 a month.
But Britain's largest insurer said people aged under 30 were so uninterested in putting aside extra earnings to pay for retirement that the firm had stopped trying to sell them savings products.
Iain Oliver, head of pensions at Norwich Union, said: "We would not target that age range generally speaking. There are a lot of things for people to spend their money on, the major thing at that age is lifestyle.
"Paying off debt would be encouraged before they put money into their pensions."
A recent MoneyMood Survey by Legal and General, the life assurer, found the propensity to save among young people was currently high.
But Mr Oliver said he had seen no evidence of a growing interest in saving by the under 35s.
"If they spend less of their disposable income then they may save that in a short-term deposit but in terms of long-term pensions I don’t see that trend," he said.
"In terms of stakeholder contributions they are very small." The Chancellor had hoped that stakeholder pensions, with a 1.5 per cent cap on charges, would re-ignite savings in Britain. But insurers have largely refused to sell the products to individuals because they say that they cannot make enough money from stakeholders.
Raj Mody, pension strategist at Hewitt, said £400 in current earnings was the basic level needed to be saved now to avoid poverty.
The figure excluded future equity market return rates.
"It will depend on investment returns and the cost of pensions," he said.
"The reality though is that most 20-year-olds have just entered the workplace, have a lot of other financial commitments. It's difficult for young people to start saving."
Tuesday, 22 March, 2005
EU issues green paper on problem of ageing
On 17 March 2005, the EU Directorate General on Employment, Social Affairs and Equal opportunities issued a Green Paper entitled "Confronting demographic change: a new solidarity between the generations". This new consultation document is intended to start a debate on how the EU should confront the challenge of its aging population and what role the Union should play in the process.
Fertility rates in the EU have dropped to 1.5 children per woman, and in 2030 Europe will have 18 million children and young people fewer than today. At the same time, improved healthcare and increased prosperity and living standards mean that the general level of life expectancy is rising significantly. By 2030, the number of "older workers"(aged 55 to 64) will have risen by 24 million and the EU will have 34.7 million citizens aged over 80 (compared to 18.8 million today).
The economic dependency ratio (the ratio of population aged 0-14 years and older than 65 years to the population aged 15-64 years) for the Union as a whole will rise from 49 per cent in 2005 to 66 per cent in 2030.
On 11 July 2005, the Commission will be organising a European Conference in Brussels where it will assemble experts, high-level policy makers and representatives of civil society, to discuss the follow-up on this Green paper.
Wednesday, 16 March, 2005
UK, 16 March, 2005 - Pension deficits for FTSE 100 companies stood at £63 billion
UK, 16 March, 2005 - Pension deficits for FTSE 100 companies stood at £63 billion at the end of February despite the recent price rises in equity markets and with the FTSE 100 index itself touching 5000 during the month, according to consultants Watson Wyatt.
The firm's estimate of the aggregate deficit for the FTSE 100 companies, measured in accordance with the FRS 17 accounting standard, compares with £61.5 billion at the end of January.
These estimates assume that contributions paid into pension schemes by UK employers in 2004 were broadly unchanged from the previous year.
"While the rise in equity prices in February increased assets by about £3 billion, the continuing increase in inflationary expectations coupled with a marginal decline in corporate bond yields also increased liabilities, leaving the net position a little worse," said Chinu Patel, a partner at Watson Wyatt.
"So the fact that equities have been going up does not necessarily mean that pensions deficits are any less pressing in their importance. By contrast the insurance buy-out deficit, where liabilities are measured by reference to gilt yields, improved marginally from £153 billon to £149 billion."
Friday, 11 March, 2005
New contracting out regulations to be consulted on
New regulations that would allow contracted-out benefits to be paid as part of a cash lump sum are to be put out to consultation announced Pensions Minister, Malcolm Wicks.
This is one of a series of proposed changes to the contracted-out pension schemes regulations that will make the benefits in pension schemes which have opted out of the Additional State pension easier to administer and understand.
Announcing the changes, Pensions Minister Malcolm Wicks said:
"The changes we want to make will help simplify an area of pensions legislation that by common consent is too complicated.
"They remove some of the restrictions on when and how contracted-out benefits can be paid. The regulations will provide pension scheme members with a greater degree of flexibility at retirement and will also make it easier to understand their benefit entitlement.
"It will be good news to pension providers and those administering contracted-out pension schemes."
The key changes will be to allow contracted-out rights in money purchase schemes to be paid as part of a tax-free cash lump sum on retirement and to increase the limit below which small pensions can be paid as a cash lump sum.
Combined with the provisions in the Pensions Act 2004 these changes introduce significant simplifications to when and how benefits in contracted-out pension schemes can be paid.
The consultation period will run until 5th May 2005.
Thursday, 10 March, 2005
ABI releases latest Pensions and Savings Index
An increasing number of people believe, that in addition to saving more, they will need to work longer to have an adequate income in retirement, reveals the latest ABI Pensions and Saving Index, published yesterday.
According to the poll, which interviews around 2,000 people, trust in the government's delivery on pension pledges remains low.
19 per cent of people said that that they trusted the government, compared to 78 per cent who do not.
Significantly, only 16 per cent of people said that they believed that the state pension and benefits would provide the biggest source of income in their retirement. 35 per cent thought that private pensions would form the bulk of their income.
The survey also found that public confidence in their own financial security in retirement remains low. 61 per cent, up 3 per cent from 12 months ago.
Joanne Segars, ABI Head of Pensions and Savings, said:
"This proves that the pensions industry and the government need to work even harder to persuade people of the need to preprare for retirement. Reform of the state pension system, in particular through reducing means testing so that people can fully benefit from their pension saving, is an essential part of the process."
Wednesday, 9 March, 2005
Pensions Service performs well, but MPs warn for the future
The relationship bewteen basic state pension, state second pension and private pension provision should be clarified, if disincentives to save are to be successfully avoided in the future.
This was just one of the recommendations of the Work and Pensions Commmittee outlined in its report on Pension Credit, published today.
The report goes on to comment that "the Government of the day must set out the strategic direction of future pension provision."
In order to help individuals, the Government should provide deatils of the likely direction of future reform and some indication when this might be possible, for example at what time the current primary focus of eradicating abject pensioner poverty might be sufficiently met.
The recent Pension Commissions report states that "means-testing within the state system is already creating, and if current indexation approaches were continued indefinitely would increasingly create, disincentives to private saving, particularly for some low income savers."
There is however a lack of empirical evidence on the extent to which indiviudals have changed their retirement saving as a result of the Pension Credit reform.
For this reason the committee also recommends that the Department of Work and Pensions, in conjunction with the Pensions Commission, attempts to quantify the relative importance of the tax, tax credit and benefit system in influencing individuals' retirement saving decisions.
Wednesday, 9 March, 2005
Double digit growth
UK balanced pooled funds enjoyed double digit growth for the second year running. Investment consultants Russell Mellon's quarterly survey shows an average return of 10.2 per cent over 2004, following a return of 18.0 per cent in 2003.
Despite a poor start to the decade, where a typical fund worth £100m in 1999 would have lost around £30m in the years to 2003, the strength of recent equity performance will have restored over two thirds of these assets.
However, with managers continuing to move money into overseas equities, the average UK year-end equity weighting fell to a new low of 51.0 per cent, while the overseas av erage hit a new high of 32.1 per cent. The main sectors to benefit were European and Japanese equities.
This shift can be attributed to the long established trend of diversification across UK pensions funds as a whole.
Tuesday, 1 March, 2005
Administrators key to new pensions framework says Watson Wyatt
Employers need to act now on pension scheme administration to cope with the legislative changes of simplification and reform less than 15 months away, says Watson Wyatt.
Talking to Alan Pickering in the latest of the firm's "Rewarding Conversations" web-based video interviews, Gary Evans, regional head for benefits administration solutions at Watson Wyatt, said:
"Given that it can take over six months to install detailed pension administration design, companies should take prompt action by involving pension administrators early on to be fully aware of the costs and difficulty involved."
He believes that time is not on the side of employers.
"With A-day less than 15 months away companies will need to offer more support to members, especially senior executives affected by the lifetime allowance, who will for the first time be considering tax options at retirement.
Companies who do not consider how they process letters, forms and explanations now will not be ready and will put themselves under unnecessary pressure," said Gary Evans.
"To manage costs generic systems, procedures and processes should be implemented. Communication is also crucial. With so much more flexibility and individual choice employers will need effective communication systems," said Gary Evans.
