Chair of the Pensions Commission, Lord Turner said:
"It is wrong to talk about a crisis of pensioner income today, but the problems in the UK’s pension system will grow increasingly worse unless a new pensions settlement for the 21st century is now debated, agreed and put in place.
That settlement needs to deal with the challenge of the changing demographics. People are living longer: together with the retirement of the baby boom generation this will put the pensions system under significant strain. People are not saving enough for retirement, the state and employers are planning to play a decreasing role in pension provision for the average earner, and the current system will deliver increasingly inadequate and unequal pensions. There are no easy answers. But an integrated set of policies can ensure that increasing life expectancy becomes not a problem but an opportunity for everyone."
Key proposals from the Pensions Commission’s report include:
* The establishment of a National Pensions Saving Scheme into which all employees without good existing provision would be automatically enrolled but with the right to opt out. Minimum default employee contribution rates would be 5% of gross pay above £5,000, of which 1% is effectively paid by tax relief: employers would be required to make matching contributions of 3%. Both employers and employees would be able to make additional voluntary contributions, and the self-employed would be able to join on a voluntary basis. The design of the scheme should aim for low costs, e.g. 0.3% per year, thus boosting the value of pension saving by up to 30%. The scheme aims to encourage people to save for a pension and to enable them to do so at low cost.
* Reforms to the state system to ensure a sound foundation on which pension saving can build. These involve a gradual move towards a more generous state pension with the state pension age also increasing over the long-term. In essence a higher pension at a later age.
* Measures to improve the position of people with interrupted work records and caring responsibilities, who are disadvantaged by the existing contributory system.
* Measures to facilitate later working and flexible retirement for those who want it.
Lord Turner said: "The National Pensions Savings Scheme which we propose will provide a new opportunity for everyone — employees and the self-employed — to enjoy good value, easy access pension provision. Our proposals will enable people who are currently excluded from good quality pension provision to build up substantial assets in their name."
Speaking today Jeannie Drake said, "We have consulted widely and received many thoughtful submissions. We cannot embrace every proposal but we have identified the architecture for a new pensions settlement. If put in place this will ensure a fair level of adequacy, will protect women and those in lower socioeconomic groups and will provide intergenerational fairness."
Professor John Hills added, "We have analysed the complex issues involved in depth. We hope that this Report gives the whole country an opportunity to be part of an open and careful debate about the difficult but necessary decisions which now need to be made to produce a sustainable and fair pension system for the future."
