17/03/03

The ABI (Association of British Insurers) has launched new proposals to make the UK’s state pensions system simpler and stronger, creating a solid foundation on which to build the private pensions framework and providing future pensioners with an unambiguous incentive to save.

In Adequacy, affordability and incentives: a better future for state pensions, the ABI welcomes Government policies to increase the income of today’s poorer pensioners but argues that, in its current form, the state pension system is “storing up problems for future generations.” Today’s publication forms a central plank of the ABI’s response to the Government’s Pensions Green Paper.

Mary Francis, Director General of the ABI said:

 “It is vital that future pensioners feel confident about what they will get from the state and that taxpayers are assured that state provision will be affordable.

“Having the right state pension framework is crucial for the success of all the other proposals and ambitions in the Pensions Green Paper. The Government needs to address this now. “

The ABI will be campaigning for a flat-rate and more generous state second pension that will lift the floor of state provision above the current minimum income guarantee. It says that this will remove the need for the means-tested Pensions Credit, which compromises incentives to save. The ABI proposal will ensure that it always pays to save.

Talking about the proposals, Mary Francis said:

“Means-testing sounds sensible, protecting those on low incomes. Our concern is that as means-testing is extended to people on higher incomes, as the Government intends, too many people will conclude that it doesn’t pay to save. This will ultimately lead to greater reliance on state provision.”

The ABI report argues that state pension reform is an urgent priority if the Government is to meet its target of raising the proportion of retirement income coming from private sources from 40% to 60%.