Pickering report recommends new pensions act
UK– Alan Pickering has called on the government to draft a new pensions act to implement the changes he proposes in his report on simplifying pensions published today. Pickering says the new act should repeal or consolidate any existing private pensions legislation.
The report lays out proposals to simplify the pensions industry including a recommendation that employers be given more scope to design the pensions they offer employees.
Among the more controversial recommendations are scrapping employers obligation to provide index-link pensions and survivors’ benefits. Pickering has also called for the creation of a new, proactive regulatory and advisory body and new codes of practice.
Work and pensions minister, Andrew Smith, says the government will produce a green paper to look at occupational and private pensions policy in the autumn.
Chairman of the National Association of Pension Funds, Peter Thompson, says the review shows effective ways to reduce red tape and will help promote greater flexibility in company schemes.
“The report highlights the problems that have all too often pushed employers out of providing good occupational schemes, The proposals could make life easier for thousands of employers that voluntarily provide pension benefits,” he says.
However the consultant Towers Perrin claims the review is unlikely to stop companies switching from DB to DC and says the proposals will have a negative impact on consumers.
“Many of the proposals are designed to turn the clock back. Employers will be able to provide pensions that are cheaper, of lower quality and less risky for the company,” it says.
The Trades Union Congress, the body representing seven million UK workers, says it would be wrong to suppose the report will solve the pensions crisis and it attacks some of its proposals.
“Ending indexation of salary related pensions will lead to poverty in old age and women in particular will be affected by the removal of survivors’ benefits, as they tend to have smaller pensions and survive their partners,” says Brendan Barber, the TUC’s deputy general secretary.
Joanne Segars, head of pensions at the Association of British Insurers, says they welcome the report as a “platform for more saving”, but feel it doesn’t go far enough.
“Pickering’s ideas for a simpler pensions framework will help people save. But further incentives are needed, such as a new pension contributions tax credit and wider availability of advice in the workplace,” she says.
Consultants Watson Wyatt warns the government not to rush into new legislation, as many employers have recently changed their scheme arrangements and will be unwilling to change them again so soon.
“The ideas and principles are worth developing and the new proposals would make it easier to restructure benefits. But a rush to new legislation would be a mistake. There is time to get the new framework right, so let’s not waste the opportunity,” says Colin Singer, a partner at the firm.
The publication of the report comes two days after the Sandler review of the £340bn UK savings industry was published. A third report, the pensions tax simplification review by the Inland Revenue will be published shortly.