UK opposition slams slow-motion pension disaster
UK - The opposition Conservative Party's pensions spokesman has called for an increase of the basic pension in a bid to revert means testing and disentangle sponsors from the “slow-motion disaster” of overregulation.
David Willets suggested the increase during a keynote address at the Pension Show and said his party backed his idea. It comes with pensions becoming increasingly high-profile and an election looming in the first half of next year.
Willet said the Turner Report, presented to the public last month, has brought an end to complacency culture. "We used to think that Britain was not part of a great pension crisis, we can now see that we do indeed have a pension crisis."
One of the possible solutions would be to increase basic pensions. "I think it is the only way to revert means testing, I believe it is the right thing to do," he told delegates.
"I detect a growing consensus about increasing basic pensions in one way or another," he said, arguing that scrapping means testing would bring a greater incentive to saving.
Pension funds would also be disentangled from overregulation, which Willets called "a disaster in slow motion".
"It is like boiling a frog. We have been boiling the frog of company pensions for generations." As various governments have shifted the cost of pension promises to companies, he went on to say "the burdens have become legally inescapable".
"This is a reason why some pension funds are in such difficulties."
Willets also mentioned the principle of a non-contributory citizen pension scheme, backed by the National Association of Pension Funds, saying he was sceptical about its success.
It would require a significant database for residency tests and it would be difficult to initiate the public to the principle of non contributory pensions, he argued.
Willets also criticised the shift from defined benefit to defined contribution which has taken place in the country in the last few years. He understood the case for final salary would become more and more debatable, but DC pensions were so modest that staff in the coming decades might refuse to leave on such terms and employers would have to devise 'departure packages'.
"I am in favour of hybrid schemes," Willetts said.