UNIVERSAL
PROTECTED PENSION
Modernising Pensions for the Millenium
A Report by the Pensions Reform Group
Click here to download the introduction to report
Following the recent talk to the COPAS London and S E group at Sunbury and again at our AGM in London, by Frank Field, MP, we set-out below some extracts from the report, about which he spoke
A copy of the full report ISBN 0 9536803 3 9, price £20.00, can be obtained from:
Rt.
Hon. Frank Field MP
House of Commons
LONDON SW1A 0AA
Cheques
payable to Rt, Hon. Frank Field MP
Acknowledgement
The Pensions Reform Group is chaired by Rt Hon Frank Field, MP.
Amongst its members are Lord Vinson of Roddam Dene, Howard Flight MP
(Cons), Steve Webb MP (Lib Dem), The Principal of Aon Consulting and
ones from Oxford University, University of Leeds, the Confederation
of British Industry, Morgan Stanley, NM Rothschild & Son Ltd. and
several other distinguished persons.
Introduction
by Frank Field
(extracted in its entirety from pages 1 & 2 of the report)
The proposals in this paper for a Universal Protected Pension
aim to provide a long-term setllement allowing everyone retiring
after a working life to live free of poverty. The Pensions Reform Group
sees this as the crucial objective that current pension reforms have
yet to meet.
A second objective of the Pensions Reform Group is to set out a plan that will simplify retirement provision.In pensions consumers face choices that are often at best exceptionally difficult and, increasingly, impossible to make a rational decision on. Our pensions proposals, while having the primary aim of abolishing poverty in retirement, will, by providing a minimum level of income above the poverty line, give consumers a real choice in their investments for retirement.
We have attempted in this reform to present as clearly as possible a workable scheme. The aim is to abolish pensioner poverty; a prospect not afforded by the Government's reforms. In order to ensure that the principles of the scheme are understood we have presented the Universal Protected Pension in outline form only. Once we have published the outline proposals we will open up the idea of a Universal Protected Pension to a serious and protracted debate on long-term pensions reform. The plan is both to invite the views of consumers and industry, and to stage a series of round table discussions on each of the main proposals for reform. We hope that the result of these discussions will be a much improved document around which a consensus for reform can be built.
Four of the main recommendations in the report immediately invite debate. The Pensions Reform Group do not see an effective way forward in eliminating pensioner poverty in the long-term without extending compulsory contributions - compulsion already exists. To be effective compulsion requires redistribution so that those on low incomes or no incomes at all can be full members of the scheme. By contrast making Stakeholder pensions compulsory would merely be inflicting reduced living standards on the poor now, in exchange for living standards that may not turn out to be any better in retirement.
Compulsion is proposed here in a simplified form for each cohort reaching the age of 25. However many people in their 20s have considerable debts, modest incomes, and perhaps family responsibilities. Soime of this deby such as student loans is now acquired at an early age. Other major forms of debt, such as mortgages, are usually acquired somewhat later, but bear heaviest during the early years of interest payments. Having to pay less contributions during these years - perhaps contributing just the SERPS / State Second Pension rebate - and paying larger contributions when they can be better afforded is one approach we would like to see discussed. As part of the debate on how compulsion might be introduced we will ask the Government Actuary to cost these alternatives.
The second major area where the Pensions Reform Group wishes to see debate is on the governance of the Universal Protected Pension. The proposals here would constitute a departure in post-war British politics.They would mean an organisation providing universal and collective provision, yet separate from the state. It represents a return to those organisations of civil society who could again take command of how welfare is organised and delivered in this country. Again, in order to concentrate debate on how fundamental a change is proposed, we present the change in the form of a single body - part elected and part appointed - being responsible for the scheme. A crucial part of the debate following publication of these proposals will be whether the objectives of a Universal Protected Pension can best be achieved through this arrangement or through some other governance structure.
A closely related area of the proposals here is the investment of the contributions to the Universal Protected Pension. In the document we suggest that a single board of trustees will be charged both with framing and overall investment policy overall investment policy and with distributing funds for management to private fund managers. We would welcome further detailed discussion on how this would work from Government, regulators and industry.
Finally, there is now a growing recognition in the pensions industry that occupational pensions - the undoubted welfare success story of the last century -m are unlikely to provide future workers with as good an income as they have done for the past three generations. Our vision for the Universal Protected Pension is to provide a much improved first tier of pension lifting people above means tested benefits. Occupational pensions will therefore move from the increasingly difficult role of ensuring people do not retire into poverty, to providing people with the money to enjoy retirement. We hope that the discussion following the publication of this paper will propose how best new arrangments could help occupational pension fulfill this role.
I would not wish, however, for the appeal for further debate to detrat from the report's achievement. It is the first report for over half a century to offer the real prospect of eliminating poverty in retirement. The plan holding out this prospect is the result of the efforts of the Pensions Reform Group. The Group is one of broad interests, and includes members of Parliament, academics, and individuals from many different financial services. Collectively we are in sympathy with the objectives and the methods by which the reforms can be implemented, but, naturally, members place particular importance on certain aspects of the report, and do not necessarily subscribe to every last detail. However all of us are anxious to see the start of a serious debate on long-term pension reform. Members joined the Group as individuals and the findings of the report do not necessarily reflect the views of their parent organisations. Our joint endeavour is to begin a serious and detailed debate on banishing pensioner poverty from our shores.
Frank Field
Important Points raised in the Report
Need
for reform
Pensioner poverty is widespread.
Recent research by the Department of Social Security suggests 47 per
cent of pensioners have an annual income less than £5,200 per
year, with an improvement not imminent.