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Experts call for shake-up of basic state pension
An independent pensions group is proposing a raft of changes to the retirement industry which could help to lift two million pensioners out of means-tested benefits.
In its ‘Fit for the future’ report, the National Association of Pension Funds (NAPF) recommends replacing the basic and second state pension with a new ‘foundation pension.’
This would provide an initial income of £8,000 a year and give pensioners an additional £25 a week compared to existing benefits. The foundation pension would be funded by a range of measures, such as increasing the state pension age to 70 by 2046 and introducing a rise in national insurance contributions.
The NAPF is also calling for the creation of large, low-cost ‘Super Trusts’, which the body says would offer benefits to savers and employers. The organisation predicts that this could eventually add around 30% to the size of someone’s pension fund.
The Government has already confirmed that a number of changes to the pensions system will take effect from 2012. These include the introduction of a new workplace pension scheme known as the National Employment Savings Trust (Nest), as well as automatic enrolment for employees and mandatory contributions for employers.
Joanne Segars, NAPF chief executive, said: ‘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.
‘The Government’s 2012 reforms are a major step forward and our proposals complete the task.’