Association calling for reforms to State pension

A pensions group is calling on the Government to reform the state pension to lift two million people out of means-testing.

The National Association of Pension Funds called this week for the basic state pension and the state second pension to be combined into a new Foundation Pension.

It said this would be worth 8,000 a year, the equivalent of around one third of average earnings and would mean two million people would no longer need to receive means-tested benefits.

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The group also called for the Government to go further in its 2012 pension reforms to ensure everyone had an adequate retirement income.

From 2012 companies will begin to automatically enrol workers into their pension schemes, although people will retain the right to opt out.

Individuals will pay in at least four per cent of their pay, with their employer contributing three per cent and the Government topping this up with one per cent.

But the National Association of Pension Funds said these minimum funding levels should be increased to 11 per cent of worker's pay.

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It also called for the creation of large, low-cost Super Trusts, which it said would enable companies to offer their workers access to quality pension schemes at a reduced cost.

Overall, the group estimates these reforms would help people save a pension worth a further third of average earnings.

The National Association of Pension Funds also wants new forms of risk-sharing pension schemes to be developed, which would offer workers some guarantees, as is currently the case under defined benefit schemes, but give employers greater certainty over the costs, in the way that they currently have under defined contribution ones.

The group also called for a permanent independent Retirement Savings Commission to be set up to take politics out of pensions.

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The commission would monitor the state of the nation's retirement saving, and report to Parliament, setting out any changes that were needed to keep pensions on track.

National Association of Pension Funds' chief executive Joanne Segars 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."

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