Britons want pensions reform

Nov 02 2004 by Brian Amble Print This Article

Britons know that a financial crisis awaits many of them in their old age and want to see significant changes to Britain's pensions system to encourage saving and boost retirement income.

But despite this, new research from the Association of British Insurers (ABI) reiterates the fact that some 7.4 million working people are still not saving at all for retirement and a further 4.8 million are saving at too little to provide themselves with an adequate retirement income

The ABI's "State of the Nation's Savings 2004" report come only weeks after the Pensions Commission's report into Britain's savings crisis warned that people would have to work longer, save more, pay higher taxes or accept poverty in their old age.

Research by Datamonitor earlier this year also suggested that the average Briton needs to contribute an additional £51,000 into their private pension to ensure a comfortable standard of living in retirement.

The ABI's report, published at its Saver Summit, reveals widespread public support for the sort of reforms to state and private pensions that the government has hitherto avoided.

Almost half (47%) of the public believe that extra spending on state pension provision should help those who cannot afford to save and encourage people who can save to do so.

Only one in four support alternative proposals for a higher basic state pension for everyone.

A growing percentage of the public believe that individuals must take the main responsibility for providing for their retirement income – up to 42% from 35% a year ago.

And contrary to claims that people are ignorant of the pensions shortfall, the ABI says that there is also wide acceptance that current demographic changes mean that people will either have to work longer (supported by 37%) or save a higher proportion of their salary (29%) than their parents to generate an acceptable standard of living in retirement.

Joanne Segars, the ABI's head of pensions, said: "These findings will confound those who argue that the public does not accept the severity of the pensions challenge or is unwilling to face the consequences."

But public confidence in public pension provision has almost disappeared. A mere three per cent of people think that state benefits will provide a comfortable income for them in retirement. Only five per cent of the population say that they are ‘very confident’ that they will have enough to live on in retirement.

The ABI is calling for state pension reform which would address the disincentives to save created by means testing by increasing the state second pension for lower earners, and provide effective incentives to save for those who can afford to do so by improving contracting out;

It also wants action to encourage greater pension contributions from employers through a new Pension Contribution Tax Credit, and greater provision of financial advice in the workplace.

"The ABI's proposals, supported by the views of savers and non-savers alike, provide an effective alternative to higher and higher public expenditure on the one hand or compulsion on the other," Joanne Segars added.

"Adair Turner has set out the problem; today we can see that there is already significant progress towards the solutions."