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A
New Pension Settlement for the Twenty-First Century: the second
report of the Pensions Commission [The Turner Report]
The
Pensions Commission's report
published on 30 November 2005 states that the current system of
private funded pensions combined with the current state system will
deliver increasingly inadequate and unequal results. Long-term pension
policy needs to be robust in the face of rising life expectancy.
Given these conditions the Commission believes that major reform
of the UK pension system is needed to create a new settlement for
the 21st century.
Details
of the proposals:
State
pension reform
- The
state pension age for men and women should rise to 66 by 2030,
to 67 by 2040 and to 68 by 2050
- Increases
in the state pension age should be linked to rising life expectancy
- The
state pension should be more generous, with increases linked from
2010 to average wages and not prices
- The
state system should become "as non-means tested as possible"
- In
future the savings element of the pension credit should rise by
less than average earnings. However, the guaranteed income element
of the pension credit should continue to increase in line with
earnings
- With
the aim of easing the plight of women pensioners, entitlement
to the state pension should be based on residency rather than
national insurance contributions
- The
over 75s should be entitled to a universal basic state pension
- The
current state second pension should evolve into a flat rate payment
- A
standing commission to monitor pension policy should be established
The option allowing personal pension scheme members to contract
out of the state second pension should be abolished
Boosting
savings
- A
new National Pension Savings Scheme (NPSS) should be established
by 2010
- People
who do not belong to a workplace pension scheme would be automatically
enrolled into the NPSS
- Employers
would be compelled to contribute to their workers' NPSS
- Under
the NPSS, employees would contribute 4% of their salary, employers
3% and the government 1%
- Employers
can opt employees out of the NPSS if they offer a pension scheme
which operates auto-enrolment and the level of contributions match
those under the NPSS
- Self-employed
workers should be able to join the NPSS on a voluntary basis,
while those not in paid work should be able to join and receive
tax relief on contributions
- Workers
who wished to contribute more of their salary should be free to
do so
- People
would be free to opt out of the NPSS
- People
will be able to choose from a range of funds where their NPSS
is invested
- The
commission said annual management costs for the NPSS should be
no higher than 0.3%
- It
should be possible for money saved in the NPSS to be inherited
Longer
working
- Age
discrimination legislation should apply to over 65s
- The
government should better publicise the already existing option
for people to defer taking their state pension
- The
government should consider whether to reduce or eliminate employer
national insurance contributions for workers over age 65
- At
present, training expenditure tends to be "skewed" towards younger
people. The government should ensure all public training programmes
are non-age specific
Implementing
an integrated package of pension reforms: the Final Report of the
Pensions Commission
This
short
document, published on 4 April 2006, is intended as the final
Pensions Commission contribution to the pension debate. It does
not revisit the underlying analysis of the Second Report, nor present
entirely new analysis, but it comments on specific issues which
have arisen and responds to some of the major arguments presented
over the last few months.
Link
to the Pensions Commission website
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