EEF, the manufacturers’ organisation has applauded the comprehensive package of proposals announced today by the Pensions Commission, believing they set out a practical and realistic framework for reforming the UK’s pensions system.
It believes that government must now provide a clear lead in encouraging a constructive debate on these proposals over the coming months and, attempt to create consensus on the way forward on this important issue for our ageing society.
The proposals announced by Lord Turner closely resemble the recommendations in EEF’s report, “Rethinking Pensions - preparing for an ageing society”. They meet our concerns that, to be sustainable, any pensions system must have simplicity, transparency, inclusion and individual ownership as its overarching principles.
Commenting on the Pension Commission’s report, EEF Director General, Martin Temple, said:
“Putting a sticking plaster on the current pensions system is clearly not an option and the Pensions Commission has set out a sensible and balanced package of reforms that we believe will help address the UK’s pensions problems. We must now have a frank and constructive debate on the way forward, setting aside vested interests and party politics.”
EEF backed the proposals for so-called ‘soft’ compulsion but recognised that there will be issues to address for Small and Medium Size companies. Martin Temple commented:
“We support the idea of soft compulsion for employers and employees but recognise that some smaller companies will find this problematic. Government must address their concerns by providing them with some initial assistance to meet the additional costs and phase the implementation over a realistic period so they can gradually adjust to this new pensions environment.”
Commenting on concerns that compulsion would be a tax on jobs, Mr Temple added:
“Even without compulsion the current system is unsustainable. The result will be a cost to companies of all sizes at some point through higher taxation, without the benefits to the economy from a greater level of saving.”
EEF also supports the introduction of a higher basic state pension increased with earnings as it believes this will simplify the system, reduce the need for means-tested benefits and remove disincentives for those on lower incomes to save for their retirement.
However, its additional cost means that we will have to decide whether this is financed by higher taxation or partially offset by gradually raising the age at which the basic state pension is paid, something we recognise will eventually have to happen.
Martin Temple said:
“The Government must use the introduction of a higher basic state pension to reduce the administrative costs and regulatory burdens that are now weighing down companies that are endeavouring to retain their occupational pension schemes.”
“It must also review its recent decision on public sector pensions as this has created a fundamentally different pensions environment for private and public sector employees, at a significant cost to the economy and the detriment of labour market flexibility.”