The conservative Party yesterday unveiled its policy promises to revitalise pension provision in the UK based on an overhaul of the state and company pension systems.
Capitalising on the absence of a Government minister at the National Association of Pension Funds conference in Glasgow, David Willetts, the Conservative spokesman on work and pensions, revealed the Tory master plan for resolving what he called the "biggest crisis facing Britain today".
He told delegates that the Government's complicated web of state benefits meant that a couple would have to have saved £142,000 to keep hold of their savings throughout their retirement. Mr Willetts called this a "staggering sum" that showed the current state system, which the Government has so far been unwilling to change, was putting people off saving.
He said the number of people who have their savings eroded by means testing will be 50 per cent by the end of the year and 73 per cent by 2025.
"We have to recognise the state's responsibility to provide a solid base so that people know their savings are worthwhile. I am a realist and I know that there is always going to be some means testing, but we are heading in the wrong direction. We are committed to the reform of state benefits," Mr Willetts said.
The Conservatives also promised they would reform the system known as contracting out, where national insurance contributions that would go into the state second-tier pension are rebated into an individual's company or personal scheme. This is an incredibly complex area of the pensions system and the current rebate levels are so low it is almost impossible even for pensions experts to decipher where the best place for the contributions should be.
Joining a company scheme would become automatic on employment under the Conservative plans. Anyone not wanting to enrol would have to actively opt out in an attempt to drive up the number of savers that are normally too apathetic to sign up.
"I have an objection to forcing people to save, but I have no objection to using inertia," Mr Willetts said. He believes the pensions mis-selling scandal, where millions were persuaded to leave their highly beneficial company schemes in favour of riskier personal pensions, would have been avoided had companies been able to "presume someone is a member of a pension scheme unless they opt out".
Figures from the Conservatives showed only £32bn a year was being put into pension funds, far lower than the £82bn the Government had estimated last year.
Companies will also be able to promote membership of their schemes to staff as part of Conservative policy. They are currently not able to put forward the benefits of their schemes for fear of falling foul of regulations that stop them giving financial advice.
To help end company pension scheme closures, the Tories will make it easier for companies to change their scheme's terms. It will also scrap the Government's plans to cap pension pots at £1.4m.Reuse content