The National Association of Pension Funds (NAPF) will today urge all three main political parties not to rest on their laurels when it comes to pension reform, presenting a blueprint for the next stage of an overhaul in Britain's creaking retirement-planning system.
The NAPF will say Britain needs a new type of basic state pension, a reform of regulation and legislation to encourage workplace pension provision, and the launch of an independent pensions commission to advise the Government on retirement issues on an ongoing basis.
The group's proposals come as the UK gears up for the biggest shake-up of pension planning in a generation. with the launch in 2012 of the national employment savings trust (Nest), a low-cost pension scheme for millions of workers not covered by private provision, as well as auto-enrolment, which will see employees become members of their work plans, unless they specifically opt out. Mandatory contributions for employers will be introduced at the same time.
However, Joanne Segars, chief executive of the NAPF, said the shake-up, which implements the recommendations made by Lord Turner's Pensions Commission, should not be seen as the endgame for pensions reform in Britain. "Our proposals are designed to create a pension system which is fit for the 21st century – they increase the value of the state pension for everyone, radically reduce concerns over means-testing, and increase the value and quality of workplace pensions," she said. "The Government's 2012 reforms are a major step forward and our proposals complete the task."
The first plank of the NAPF's proposals would see the launch of the Foundation Pension, a combination of the existing basic state pension and the state second pension worth £8,000 a year in today's money, around £25 a week more than existing benefits. The scheme could be paid for by reforms of other state benefits and would lift some 2 million pensioners out of means-tested payments.
The NAPF will also call for a reform of the legislation covering employer-sponsored private pension schemes, so as to allow companies and other organisations more flexibility in designing schemes. In addition, it hopes such reforms would enable the launch of "super trusts", low-cost schemes joined by large numbers of employers.
The NAPF added it wanted to see the existing pension regulators combined in order to create a singe authority, as well as the launch of a Retirement Savings Commission which would act as a permanent adviser on whether Britain's pension system was fit for purpose.
Ms Segars said her proposals would build on the reforms currently being implemented, rather than requiring further upheaval. "This is an extension of where we have been coming from, not a redrawing of the landscape," she said. "I think most politicians understand that there is further to go."
Nevertheless, there is some frustration in the industry with the most recent Government actions on pensions. Although the 2012 proposals have been broadly welcomed, pension professionals are fighting a rearguard action over plans to limit tax relief on pension contributions for high earners, which were confirmed in last week's Budget.
At the other end of the scale, there has been some concern about the charging structure announced this month for Nest, which will see members charged 0.3 per cent of their funds each year, but also required to pay upfront charges of 2 per cent on their contributions. The latter fee could deter savers from remaining in the scheme, some pension experts have warned.Reuse content