The National Association of Pension Funds wants the complicated and expensive current system of means testing and contracting out replaced by a standardised and easy to understand pension. The NAPF want a flat rate pension of £105 per week rising in line with earnings, with any savings above that figure used for retirement provision.
A third of British pensioners are not claiming the pension credit they are entitled to, which would bring their weekly income up to £105, despite advertising campaigns by the government to raise public awareness.
The Director General of the Institute of Directors (IoD), Miles Templeman, has said that the starting point for any reform of pensions has to be simplification. He believes that a rise in state pension is necessary, along with the need for a longer working life and higher levels of saving. 'The Government has responsibility for deciding retirement age and the amount given in state pension, but the present tax burden is one reason why individuals and businesses cannot save more into pensions'. Employers, employees and the government should work in partnership to tackle the present pensions crisis.
Our view
The current system is complex yet we assume given that you accrue State Benefits over a working lifetime of 49 years and finance laws change every year - the system of evaluating contracting out is bound to be complex. We see no way to remove the complexity.
Learn more about contracting out in our State Pensions Centre.