UK - The National Association for Pension Funds (NAPF) has announced radical new proposals for pension reform in the UK, which it intends to put to the government. The proposals focus on simplifying the UK pensions market, boosting incomes for the poorest pensioners, removing barriers to workplace pension provision, and improve consumer understanding and protection.

“Today’s pension system is weighed down by red tape, jargon and complexity. Because of this, too many of today’s workers are put off thinking about pensions, storing up potentially massive problems for the future”, says NAPF chairman, Peter Thompson.

In its paper, “Pensions – Plain and Simple”, the NAPF proposes replacing the existing mix of state pension provision, which is often criticised for being confusing, with a single, universal, flat rate “Citizen’s Pension” worth £100 a week at present (or 22% of average earnings).

The state second pension (S2P), top-up scheme to the state pension from which individuals may contract out, would be phased out to make way for the new universal citizen’s pension within the next decade, which would raise the amount for single pensioners from £75 to £100 a week. The suggested scheme is affordable, claims the NAPF, and is in line with the government’s current spending plans.

The age of retirement, however, would have to be raised to 70 over the decade from 2020 to 2030 to ensure that on a long-term basis, spending on the proposed scheme would not exceed current public expenditure. As life expectancy is projected at increasing to 84 for men and 87 for women, the NAPF believes there is a need to raise the age of retirement. This could, in time, set the norm for the standard retirement age in occupational pension provision, although, the issue of ageism would have to be formally dealt with.

In terms of fiscal policy, the NAPF suggests that more generous tax treatment for longer-term savings should be introduced. Pension savers currently receive the same tax treatment as savers in ISAs or other short-term savings vehicles. Says Christine Farnish, NAPF chief executive: “disincentives need to be removed.”

The NAPF also proposes the abolition of present rules which limit individuals from joining more than one pension scheme, and the abolition of restrictions on the amount individuals can pay into their pension scheme.

It is hoped that the proposals will used when then the government draws up its own reform proposals at the end of the year.