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The Turner Report. An overview of the proposed ACA response to the second report of the Pensions Commission. Background. First Report issued November 2004 Feedback/comments made early 2005 Second report issued November 2005 Final (brief) report end March 2006
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The Turner Report An overview of the proposed ACA response to the second report of the Pensions Commission
Background • First Report issued November 2004 • Feedback/comments made early 2005 • Second report issued November 2005 • Final (brief) report end March 2006 • ACA preparing a draft response – which needs to be submitted quickly to both Turner and the DWP • looking for views from members
What the ACA supports • State PAYG system should aim to • keep people out of poverty • have minimal means testing • be less linked to NI contribution record • Consolidate BSP + S2P over time (earnings linked) • Contracting out reached its sell-by date • Higher SPA inevitable to contain costs.. • .. but e’ers to be encouraged to keep older workers • Regional/occupational differences in longevity to be addressed by occupational health care/ education • Establishment of a permanent Pensions Commission
ACA Concerns on NPSS • low cost DC unlikely to work well for low paid • Income projected to be 15-18% earnings (median earner) • in practice rage likely to be much wider Based on national average earnings, saving from age 30, returns gross of 0.3% AMC and real earnings growth of 1% per annum.
NPSS: ACA View • Role of state scheme – to provide basic poverty protection only (though integrated BSP/S2P non means tested) • So why enforce an additional layer via NPSS? • Risk of even more final salary closures as e’ers ‘dumb-down’ to NPSS for everyone • Better to have further provision on a voluntary basis – with state encouragement - to build on top of basic state provision
Work based schemes: ACA view • A UK success story! They have provided comfortable retirement for millions - but now in rapid decline • Why no new incentive, however modest, to reverse this decline? • Could easily be done if there was a will(remember the contracting out ‘bribes’?) • EG employers who set up ‘good’ schemes could get an NI incentive (say 1% of pensionable earnings) • In addition – repeal S67 so employers could, subject to notice/clearance, make retrospective increases in retirement ages to mirror improved longevity • Pause pension increases if funding problems arise
Suggest a model Scheme? The Minister has asked for alternative suggestions • 1% CARE • NRD 68 in 2030(increase thereafter with longevity) • Lump sum accrual on top ( eg 5 x pension) (payable at, say, 65) • No compulsory pension increases • Dependants’ pensions? Might cost 15% of earnings, split 10% e’er and 5% e’ee. As it used to be!
Conclusions • State to provide good level of poverty protection, but no more • Ways must be found to reverse the decline of DB • Explicit incentives • Greater ability to retrospectively change benefits in times of difficulty • Repeal most of the add-ons (compulsory indexation, transfers?) to provide safety valve and reduce administration