Principles for reform – The national pensions debate
Foreword
The challenges facing the future of UK pensions are higher in the public consciousness than ever before.
The Pensions Commission recently produced a valuable interim report on private pensions - probably the single most comprehensive piece of analysis of the British pension system that we have seen. In parallel with this work, it is right that we should also turn our attention to the state system.
Most of the issues the Commission identified will not apply with full force for two decades or more. It is therefore essential that we ensure we get the right policies for the long term, and heed the Commission's plea to avoid knee-jerk reactions to their work, instead developing our thinking through considered debate.
We have already introduced a wide range of reforms that have helped ensure that pension incomes are high now, but further steps are needed to ensure that people get the retirement income they expect in the future.
Changes in society mean that we cannot rely on old ideas and structures to provide the same outcomes as we move further into the 21st century. We need to strike a new balance of rights and responsibilities between the State, employers, the financial services industry and individuals for provision of long-term savings and retirement income. We need to ensure that everyone who has made a contribution to society is appropriately rewarded through the pension system.
The State has made important progress in removing the fear of poverty in old age, but this is not its only role. The State should also give everyone a base upon which to build adequate incomes in retirement. Recent reforms have made progress on this too, but getting this role right in a future with more pensioners is a big challenge.
Employers need to help employees build decent pensions on the state foundation. An investment in an employee's pension provision is an important part of the reward package.
The financial services industry has a role in providing investment and administrative services to many employers who might run occupational schemes and in providing savings products to individuals.
Individuals also have a big part to play, taking more responsibility for their own retirement provision. They should be supported by the State and their employer to feel confident in investing and saving more to build up their future retirement income, and they should have the option to work for longer if they choose to do so.
We have already made great strides over the last seven years in tackling the immediate problem of pensioner poverty and putting in place the necessary reforms to help people plan for the future. This paper sets out the principles for wider reform of the pension system, which will guide our work in designing a pension settlement that meets the challenges set out so clearly in the Pensions Commission's first report.
The Right Honourable Alan Johnson MP