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Government wary over Pickering recommendations

UK- The government has reacted cautiously to recommendations in yesterday’s pensions simplification report that it legislate to end a compulsory inflation link for pensions and to scrap benefits for spouses.

Secretary of state for work and pensions Andrew Smith said that, on first reading, the proposals to scrap mandatory indexation and spouses’ benefits were “not attractive”.

“They go against the drive for the last 30 years to price-protect pensions and enhance survivors’ benefits,” he said. He declined, however, to rule the measures out.

The 98-page report by Alan Pickering, former chairman of the National Association of Pensions Funds, suggested employers should be given more freedom in designing the schemes they offer employees.

Smith is believed to be more receptive to proposals that would allow companies to compel employees to join their scheme. The government will issue a green paper in the Autumn that will look at occupational and personal pensions.

It will, says Smith, consider the findings of the Sandler report on the savings market as well as the recommendations of an imminent report from the Inland Revenue into simplifying pensions tax.

While the report’s recommendations were broadly welcomed by employers and life assurers, unions have reacted angrily. Roger Lyons, general secretary of the manufacturing union Amicas called the proposals “a sell-out” of millions of workers.

“Removing the obligation on employers to increase pension benefits with prices would inevitably lead to pensioner poverty in the long term, and removing survivor benefits would be a disaster for practically every couple in the country,” he said.

John Edmonds, general secretary of the GMB Union, said Alan Pickering’s recommendations could lead to what he called “the biggest pensions rip off in history. He claims that the government has called on “an industry insider who is trying to make it as easy as possible for employers to renege on any pensions responsibility.”

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