UK – The Industrial Society, the UK social affairs think-tank, has called for employer contributions to be made compulsory for the fledgling stakeholder pensions system.

In its latest policy report entitled ‘Pension Tension’, produced in tandem with the launch last Friday (April 6) of the new stakeholder regime, the society argues that it is wrong for the UK government to introduce a move to greater reliance on private pensions without better safeguards for stakeholder plan adherents.
The report argues that many people will not be able to afford to pay into a stakeholder plan the amount needed for a decent pension without such employer additions.

It also proposes that the minimum funding requirement (MFR) should be replaced by a government backed mutual insurance arrangement and that the government should abandon the pensions credit system in favour of an increase of the state pension.

Sue Ward, independent pensions expert and author of the report, comments: “The ambition shown in introducing the pensions changes proposed is matched by the delivery. “The government has failed to think through the basic principles that should underpin a fair pension system in a modern social democracy.”

The society makes a number of further recommendations that it believes are a move in the right direction on the principles considered by the report; pensions fairness, clarity, security and efficiency/value for money.

These include better policing of employers passing over contributions, so that in any case where this is not happening provisions can be made to ensure employees do not lose out on their pensions.
The report also recommends that CAT marking of pension products to ensure their quality should be extended to other products such as annuities.
Furthermore, a suggestion is made that personal pension schemes contracted out of SERPS or the new state second pension (S2P) should be required to give a minimum guarantee rate, backed by the government.
The issue of flexible retirement ages should also come on to the government’s pensions agenda, adds the report.