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CBI Calls For Raising Of State Pension And Retirement Age
David Black, The Scotsman
Scotland
July 19, 2004
The age of retirement should be raised five years and the state pension increased as a way out of the current pensions' crisis, the Confederation of British Industry said yesterday.
The proposals were put forward by the CBI's Pensions Strategy Group, which said raising the basic state pension to the level of the current Pension Credit would reduce the need for means-testing low-paid workers, and could be partly paid for through increasing the retirement age by increments to 70 between 2020 and 2030.
The CBI estimated the move would lead to around 7.1 per cent of GDP being spent on pensions by 2050-51 compared with an estimated 6 per cent under the current system and it called for employers and workers to help meet any extra cost by saving more into pensions.
The CBI's proposals also said that employers who could afford to contribute to staff pensions should do so if staff were also paying into them, and that new employees should be opted automatically into pension schemes, as the best way of increasing take up among staff.
But it rejected calls from the TUC to make it compulsory for both companies and individuals to pay into a pension scheme, saying this could lead to some firms reducing their contributions to the legal minimum, and at the same time it would increase the cost to business by up to £22 billion a year.
Pension schemes should be modernised to combine the best elements of final salary and defined contribution schemes, such as splitting the risk between companies and staff, the report said. The CBI also called on the government to increase incentives for companies and staff to pay into pensions schemes, particularly for small- and medium-sized firms and people on low earnings.
It said this could include the government paying for free financial advice for people in small companies, and the introduction of a partnership pension into which it would match the contributions being made by employers and staff for a limited period to kick-start saving.
It estimates this initiative would cost government about £762 million a year. In addition, it said the government should reduce the regulatory and cost burdens on companies offering schemes, and should commit to at least maintaining the current system of tax relief.
It added that government should also consider introducing a tax credit for SMEs contributing to pension schemes, and should consider paying for industry-wide schemes to be set up.
Richard Greenhalgh, the chairman of the CBI strategy group, and of Unilever chairman, said: "There are no easy solutions, but this report is a serious attempt to assess how we avoid widespread pensioner poverty in the decade ahead.
"The UK's voluntary approach must be reinvigorated and we are confident it can be. That means employers, government and individuals recommitting to pensions."
The report also warned that the current public sector pension schemes could not be sustained. It said that unless these were made more affordable it would lead to growing resentment among private sector workers and firms which were paying for them through taxes.
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