Mercers attacks UK government's pensions policy
UK- Mercer Human Resource Consulting has attacked the government’s pensions policy on the eve of publication of reports on pensions simplification and the medium and long-term savings markets.
The attack comes as Alan Pickering, former chairman of the National Association of Pension Funds, is due to publish his government-sponsored research on simplifying the pensions industry.
On thursday he is expected to recommend simpler pensions and savings products and the introduction of those that can be sold ‘off the shelf.’ He is also expected to propose that employers be given a freer rein to design the type of pensions they offer their employees.
But Mercers claims the reviews fail to tackle the real problem and it cites reports suggesting Mr Pickering’s proposals may fall short of radical reform.
Senior consultant Deborah Cooper says: “the government has commissioned a series of reviews on pension reform, but none of these appears to address the fundamental issue- that the cost of pension provision is increasing due to lower investment returns and increased longevity.
“Until the government addresses the basic needs of the population over state pension age, and restores the incentives for long term saving, pension provision will continue to wither.”
Mercers has called on the government to combine the basic state pension and state second pension into a single flat-rate, integrated pension linked to earnings. It has also recommended that contracting out be abolished and the minimum income guarantee and pensions credit be scrapped except to those in, or near, retirement.
“The new state second pension addresses some of the problems of SERPS but at the cost of such complexity that most people will be unable to appreciate the benefits,” says Cooper, adding “the minimum income guarantee only meets about 70% of a person’s basic needs in retirement and about half a million eligible pensioners are not drawing this benefit.”