UK insurers want change to means-tested pensions
UK – The main UK insurance body has called for a change to plans for means-tested pensions, saying the country is “storing up problems for future generations”.
While welcoming government policies to increase the income of today’s poorer pensioners, the Association of British Insurers says the system “won’t work tomorrow”, and has produced a publication in which it proposes amendments to the government’s Green Paper on pensions reform.
To increase incentives to save, the ABI is calling for means-tested pensions credit to be removed. Explains Mary Francis, director general of the ABI: “Means-testing sounds sensible, protecting those on low incomes. Our concern is that as means-testing is extended to people on higher incomes, as the government intends, too many people will conclude that it doesn’t pay to save. This will ultimately lead to greater reliance on state provision.”
“One estimate suggests that 82% of pensioners will rely on means-tested benefit by 2050, leaving many wondering why they should save and leaving the government with a larger bill,” says the ABI.
In order to remove the need for means-tested credit, the ABI is campaigning for a flat rate and more generous state pension that “will lift the floor of state provision above the current minimum income guarantee.”
The ABI also wants to see lower income earners have increased state pension rights, and higher income earners given a clear incentive to make private savings in place of a state second pension. “This would reduce the government’s future liabilities, and kick-start private pension provision,” says the association.
The consultation on the government’s proposals for reform, released in a ‘Green Paper’ in December, is continuing until March 28. Trade bodies, industry participants and experts have been invited to submit their responses to the department of work and pensions. Also taking place is an online forum for members of the public to react to the proposals. After March 28, it will be decided which of the proposals to amend and take forward.