NAPF chief executive Christine Farnish has challenged the government to stand by its word to support existing pension provision, and cut regulatory and cost burdens on schemes.
“With funded pension liabilities totalling around a trillion pounds and schemes significantly underfunded, legacy pension schemes are now a major economic issue and pose a challenge for government,” Farnish told delegates at the NAPF’s annual conference in Edinburgh.
With pension costs making up as much as 30% of company payroll costs, there appears to have been a “dampening effect” on investment and economic growth, she added, referring to comments made by the Treasury Select Committee and the Bank of England.
A further issue is the emergence of a two-tier workforce, where employees doing the same job are receiving different remuneration due to some workers being members of closed DB schemes and newer recruits belonging to less generous DC arrangements.
“The government needs to look again at the regulatory framework for such schemes and bring an element of flexibility back into the system, so voluntary pension schemes set up by employers can adapt to changing economic and demographic conditions over time.
“Unless we can unwind some of the additional requirements imposed on schemes over the years, while still delivering a fair deal for existing DB scheme members, we face an increasingly unstable situation going forward,” said Farnish.
In other conference news, the director of Newcastle University’s Institute for Ageing and Health, professor Tom Kirkwood told delegates there is no set limit for the length of human life.
“Biological research over the last 20 years has shown us that actually there is no strict biological program for ageing and no set upper limit for the length of human life,” said Kirkwood.
He added that ageing is intrinsically variable and there is a need for flexibility. There is also a need to rethink the transition from full employment to retirement.
Meagan Rees
Taking better account of biological changes (and their diversity) needs to inform these processes.
According to Kirkwood, “Until recently most forecasts have confidently predicted that life expectancy would be limited by the fixed nature of the aging process, and an inbuilt maximum life span for all species.
“Contrary to this expectation, we have seen no slowing in the rise in life expectancy. The continuing increase in life expectancy is being driven by rapid declines in mortality at the oldest ages, with people reaching old age in better and better health.
As a result, there is huge opportunity to use the emerging lessons from the study of ageing to devise pension and retirement arrangements that reflect the extraordinary success of increasing longevity, he said.
The NAPF’s Farnish added: “We need to listen to the messages coming from scientific research into the ageing process and ensure the get fed into the pensions reform agenda.”