Click here to skip to content

Welfare Reform on the Web (May 2006): Pensions - UK

Can the National Pensions Savings Scheme work?

J. Shirley

Pensions International, no.80, 2006, p.8-10

The Turner Commission’s report on UK pension reform proposed the creation of a National Pensions Saving Scheme into which all employees would be automatically enrolled, although individuals would have the right to opt out. Employees would contribute 4% of salary to such a scheme, employers 3% and government 1%. This article argues that this proposal may not work because:

  • Employees on the lowest salaries may choose to opt out
  • Investing the huge sums generated by such a scheme in shares in a limited number of large companies could artificially inflate their value, leading to a stock market crash. There is also a shortage of good quality fixed interest bonds available for provision of pension income in retirement.
  • Employers who currently contribute more than 3% of salary to occupational schemes may take the opportunity to close them or reduce their level of contributions.

P. Wintour

Guardian, April 5th 2006, p.21

Chancellor Gordon Brown has announced his acceptance of the principles of the Turner Commission’s proposals in respect of linking pensions to earnings, as well as plans to restrict means testing, and phase out pension credits. His opposition remains unchanged regarding the affordability of the Commission’s proposals however. The article provides comparative figures and graphs.

[See also Times, April 5th 2006, p.6&7; Daily Telegraph, April 5th 2006, p.1; Independent, April 5th 2006, p.6]

C. Adams

Financial Times, April 24th 2006, p. 1

The Cabinet proposes two bills, the first introducing some Turner proposals to reform the basic state pension in November, the second delayed to allow for extensive consultation with business over controversial compulsory contributions. Affordability issues remain unresolved.

N. Timmins

Financial Times, April 5th 2006, p.5

While leaked plans show the government’s development of a hybrid response to the Pension Commission proposals, Chancellor Gordon Brown is reported to have “softened” his stance. Turner warns about rapidly declining pension provision in small and medium sized companies and emphasises the need to take his proposals as an integrated package. The article provides comment and analysis from Turner and industry pension specialists about risks, and about both employer and employee competence in choosing fund managers.

[See also Daily Telegraph, April 5th 2006, p.4]

J. Philpott

Financial Times, April 17th 2006, p.13

Proposed welfare and pensions reforms aim to increase the number of older workers. While arguably good for the economy, the article questions whether the policies are necessary as the trend away from early retirement already exists. The article looks at access to retirement finance, job satisfaction, employer provided training, and productivity-age variables.

R. Murray-West

Daily Telegraph, March 29th 2006, p.1&4

The number of retired people working part time to supplement pensions is likely to double in the next five years according to a survey by GE Life, while official statistics show a record rise of 100, 000 people over sixty taking new jobs. The article provides comments from the firm, example cases and some analysis.

[See also Times, March 29th 2006, p.20]

S. Jenkins

Guardian, April 5th 2006, p.29

The Treasury can in reality afford the Turner Commission’s pension reform proposals according to this comment piece which analyses the positions of the two camps.

H. McCarthy

Pensions International, issue 80, 2006, p.10-11

Article introduces the Association of British Insurers’ alternative to the National Pensions Saving Scheme proposed by the Turner Commission. Under their proposals, every employee not covered by an occupational scheme would automatically be enrolled into a “Partnership Pension” account. Each member would be given a unique account number, which he/she would keep for their entire working lives. Employers would choose a pension provider to manage partnership pensions for their employees. Once all this is established, employers would contribute 3% of salary, employees 4% and government 1%.

Parliamentary and Health Service Ombudsman

London: TSO, 2006 (House of Commons papers, session 2005/06; HC 984)

The report sets out the results of the Ombudsman’s investigation into complaints about the security of final salary pension schemes and alleged delays in the winding-up of certain such schemes. It contains the evidence the Ombudsman’s investigation has uncovered through consideration of departmental files, official publications and other documentary sources. It also contains his findings and recommendations arising from these findings as well as the Governments response to his recommendations. One of the main findings is that official information about the security of the pension schemes was sometimes inaccurate, often incomplete and therefore potentially misleading and that this constituted maladministration.

C. Adams

Financial Times, April 24th 2006, p.2

A former pensions minister and chair of the Pension Reform Group proposes a protected, universal pension claiming to be worth more than 50% above today’s basic. The proposed system, comprising a basic state pension and a new funded scheme, would be managed by government but overseen by the Bank of England to ensure returns reached 25 to 30% of average earnings. Whitehall is reportedly critical.

Search Welfare Reform on the Web