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The Turner Report

This comprehensive overview examines the ACA's response to the second Pensions Commission report, discussing key proposals and concerns regarding the National Pensions Savings Scheme. It delves into suggestions for improving work-based schemes and offers insights on creating a sustainable model scheme for future pensions. The report emphasizes the need for state involvement in poverty protection while advocating for voluntary, incentivized pension schemes to bolster retirement provisions.

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The Turner Report

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  1. The Turner Report An overview of the proposed ACA response to the second report of the Pensions Commission

  2. Background • First Report issued November 2004 • Feedback/comments made early 2005 • Second report issued November 2005 • Final (brief) report end March 2006 • ACA preparing a draft response – which needs to be submitted quickly to both Turner and the DWP • looking for views from members

  3. What the ACA supports • State PAYG system should aim to • keep people out of poverty • have minimal means testing • be less linked to NI contribution record • Consolidate BSP + S2P over time (earnings linked) • Contracting out reached its sell-by date • Higher SPA inevitable to contain costs.. • .. but e’ers to be encouraged to keep older workers • Regional/occupational differences in longevity to be addressed by occupational health care/ education • Establishment of a permanent Pensions Commission

  4. ACA Concerns on NPSS • low cost DC unlikely to work well for low paid • Income projected to be 15-18% earnings (median earner) • in practice rage likely to be much wider Based on national average earnings, saving from age 30, returns gross of 0.3% AMC and real earnings growth of 1% per annum.

  5. NPSS: ACA View • Role of state scheme – to provide basic poverty protection only (though integrated BSP/S2P non means tested) • So why enforce an additional layer via NPSS? • Risk of even more final salary closures as e’ers ‘dumb-down’ to NPSS for everyone • Better to have further provision on a voluntary basis – with state encouragement - to build on top of basic state provision

  6. Work based schemes: ACA view • A UK success story! They have provided comfortable retirement for millions - but now in rapid decline • Why no new incentive, however modest, to reverse this decline? • Could easily be done if there was a will(remember the contracting out ‘bribes’?) • EG employers who set up ‘good’ schemes could get an NI incentive (say 1% of pensionable earnings) • In addition – repeal S67 so employers could, subject to notice/clearance, make retrospective increases in retirement ages to mirror improved longevity • Pause pension increases if funding problems arise

  7. Suggest a model Scheme? The Minister has asked for alternative suggestions • 1% CARE • NRD 68 in 2030(increase thereafter with longevity) • Lump sum accrual on top ( eg 5 x pension) (payable at, say, 65) • No compulsory pension increases • Dependants’ pensions? Might cost 15% of earnings, split 10% e’er and 5% e’ee. As it used to be!

  8. Conclusions • State to provide good level of poverty protection, but no more • Ways must be found to reverse the decline of DB • Explicit incentives • Greater ability to retrospectively change benefits in times of difficulty • Repeal most of the add-ons (compulsory indexation, transfers?) to provide safety valve and reduce administration

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