Pension Commission: reaction broadly positive
UK – The Pension Commission’s interim report was broadly welcomed by the government and industry observers – here is a selection of comments from politicians, industry groups, consultants and unions.
Pensions minister Alan John told Parliament: “In this initial baseline report, the Commission has made a number of recommendations about how the Government collects and analyses statistical information. I welcome and accept these.
“The report stresses that whilst some major advances in pensions have been made in the last few years, pressures on private pensions have been building up since the early 1980s. As the Commission says, we need "well-founded policy recommendations" rather than "immediate conclusions".
He added: “The report recognises the importance of strengthening private pensions. The Pensions Bill and other forthcoming measures – outlined in the report - will restore public confidence in pension saving, whilst making it easier for firms to run good schemes.”
David Willetts, pensions spokesman for the opposition Conservative Party, said: “Adair Turner’s report is a powerful wake-up call. His analysis shows that we can’t carry on like this. That’s why we have produced our eight-point action plan.
“We need to reform the state benefit system, which he shows is far to complicated. We need to provide better incentives to save. And we need to tackle the most pervasive form of discrimination in our country today – age discrimination.
Terry Faulkner, chairman of the National Association of Pension Funds, said: “This excellent report gives the Government the opportunity to overhaul its present pensions strategy. “If the political will exists, this report can provide the catalyst for a shift in emphasis away from complex means tested benefits, which cloud the picture for consumers and which have contributed to Britain’s yawning savings gap.
John Cridland, deputy director general of the Confederation of British Industry, said: “This appears to be a spot-on analysis. The report shatters the illusion that there is a single magic solution to the pensions crisis. Compulsion would be a complete blind alley.”
Mary Francis, director general of the Association of British Insurers, said: “Three years ago the ABI (Association of British Insurers) calculated that there was a savings gap of 27 billion pounds each year. This now looks like an under-estimate. There are no easy answers to the pensions crisis, but the bones of a solution are emerging.
The ABI recommends putting employers “back at the heart of pension provision”. “We want to see a package of employer-focused incentives aimed at getting people to save. Where an employer makes even a modest contribution, pension scheme take-up increases five-fold.”
Graeme Leach, chief economist at the Institute of Directors, said: “We need to see a savings renaissance in the UK. The Government has an important role, but ultimately it is a matter of individual choice. Where the Government does play a fundamental role is in deciding the retirement age and the generosity of the State Pension. Here, the Government is going to have to make some tough choices. The Commissions second report, due in 2005, will need to be bold and brave.”
John Shuttleworth, a partner at PricewaterhouseCoopers, commented: “None of the Commission's conclusions are new but they are rigorously arrived at. Adair Turner has correctly identified that the issue is persuading people. In pensions, fuzzy thinking is endemic; weak arguments are hidden behind dubious data. The Commission's focus on hard facts is therefore refreshing.
“The situation may be desperate but it is not yet serious. The report is a wake-up call. Without realising it, millions who used to have low risk defined benefit pensions, now have volatile and unsuitable DC equity investments."
Raj Mody, principal consultant at Hewitt Bacon & Woodrow, said: "Companies should be increasingly searching for a middle-ground solution, where risk is shared and retirement options are more flexible, catering for different working patterns such as part-time working in a different role as an individual gradually phases into retirement over a period of several years.”
Deborah Cooper, senior research actuary at Mercer, said: “The report shows we have to save considerably more if we want to meet our retirement aspirations. Those who want to maintain a relatively high standard of living in retirement need to work longer or save more while in work – and probably both.”
The Trades Union Congress said: "The voluntary approach to pensions saving has had its day. The country faces a stark choice. We either save more now or pay a high price later. For a decent retirement for all either all employees and employers start paying enough into pensions, or everybody will end up paying more tax and working for longer.”