The Actuarial Profession, Staple Inn Hall, High Holborn, London, WC1V 7QJ, 16:00, 15 June 2010
Kindly supported by Aviva
A series of reforms to the UK pensions system are being implemented as we speak. For instance, the female state pension age is rising, the number of NICs qualifying years needed for a full basic state pension has been reduced, and the State Second Pension is becoming more flat-rate. In 2011 the National Employment Savings Trust will spring into life, and tax relief for the highest earners will be restricted. Beyond that, the earnings link will be restored, and state pension age will rise for men and women to 68. Will any of this change following the general election – and where does pensions reform go from here?
Without question, the ground shifted under the pensions reform agenda as the economy experienced the effects of financial crisis. But while affected by the economy, pensions reform has not yet been unduly affected by politics. The reforms that emerged from the Pensions Commission, chaired by Adair Turner, have enjoyed remarkable cross-party consensus.
Whether this remains the case is open to debate. There are several issues on the horizon for pensions reform that will present difficult choices and bold policies – both today and for generations to come. There is also a clear need to broaden the debate to retirement income more generally, involving issues around financial services, employment, cost of living, etc.
How to incentivise individuals to save for their own retirement was one of the main objectives of the pensions reform agenda; it is an issue which has not yet been resolved, not least because it has been clouded by the economic downturn. Clearly, we need to continue to tackle pensioner poverty, while overcoming the inherent savings disincentive of means-tested support. Therefore, the progress of NEST will have to be closely monitored to ensure the right incentive structure is in place. But perhaps more importantly, we need to consider what the right balance is between the various strands of state provision. Many argue that a simpler and more generous residency-based state pension could improve incentives.
The economic downturn has also brought other challenges, such as how the state should protect pensions saving in the future, and whether pensions tax relief should be reformed.
Introducing greater flexibility into pensions saving may be one way of providing incentives. As such, allowing early access to pensions saving has been suggested, to enable individuals to partly drawdown their savings at times of greatest need. So too has an end to compulsory annuitisation.
Annuities in general have been subject to debate recently. How to provide individuals with meaningful choices when they reach retirement, in the context of wider asset decumulation options, will be an important challenge for the pensions system in the future.
Some of the questions the debate addressed were:
- How can we help individuals to make the right choices on retirement?
- What is the right balance between universal and means-tested support in pensioner benefits?
- Is the restoration of the earnings link safe?
- Should the state pension age rise further and faster?
- How can the consensus around NEST be maintained?
- Will greater flexibility in pensions schemes incentivise saving?
- Should tax relief on pension contributions be reformed?
- How can the annuities market be shaped to enable more choice for individuals?
- What is the future of pensions protection?
Agenda from the event:
Registration and refreshments
Welcome & opening remarks by Actuarial co-chair: Charles Cowling, Pension Capital Strategies.
Introduction from Paul Goodwin, Head of Pensions, Aviva.
Introduction by co-chair, Baroness Sally Greengross, International Longevity Centre-UK.
Steve Webb MP, Minister of State for Pensions.
- Baroness Patricia Hollis, House of Lords;
- Lawrence Churchill, Chair Designate of NEST (National Employment Savings Trust), Personal Accounts Delivery Authority; and
- Chris Curry, Research Director, Pensions Policy Institute.
Audience discussion with speakers.
Close and drinks