| Lord Turner tells MPs to set example for pension scheme |
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LONDON: British MPs must set an example by giving up their pension scheme if they are to impose tougher pension constraints on voters, Lord Adair Turner, who headed the Pension Commission has said.
He emphatically said the MPs should lead the way in dealing with the country's pensions crisis. It is very difficult to have a group of legislators, who find it difficult to push up the state retirement age for the whole of society and who are themselves not covered by this suggestion.
Lord Turner questioned the treasury estimates that his plan would cost 16 billion pounds. He said there should be a sensible debate about these figures. "Some of the things that have been said. . . obfuscate what is going on rather than producing clarity."
However, he said he was surprised his report had prompted so much debate. It's not war, it's not AIDS in Africa, though it is an important issue of public policy, he added.
The commission in its report said pension age should be increased in a phased manner and in return for this increase, the basic state pension should in future rise in line with earnings, rather than inflation. The pensionable age should be increased from 65 to 68 by 2050 -- to 66 by 2030, 67 by 2040 and 68 by 2050.
Among the other important proposals are:
-- employees to be automatically enrolled into a new National Pension Savings Scheme (NPSS) if they are not already in a sufficiently-backed company scheme, although they would have the right to opt out
-- the current state second pension should evolve into a flat-rate payment
-- the state system should be "as non means-tested as possible"
-- the savings element of the pension credit should rise by less than average earnings.
Lord Turner later told media persons that he thought the proposal would eventually win public support.
Corroborating his view that politicians are not affected by the pension issues, actuaries Watson Wyatt found that anyone working in the private sector will have to accumulate 1.29 million-pound fund in order to get the same index-linked income for life that a MP can get after less than 27 years of work. It said a private sector employee will need to save 30,000 pounds or more a year -- more than five times a MP's pension contribution of less than 6,000 pounds a year -- to have the same benefits, Watson Wyatt said.
MPs enjoy inflation-proof pensions based on final salary or defined benefits -- unlike the private sector pension schemes. Their pensions are not affected by increased taxation or other usual economic parameters. For MPs and civil servants, the number of years served and the level of pay on retirement are the main criteria. In fact the MPs had voted to improve the benefits of their pension three years ago.
Posted
on : Sat, 03 Dec 2005 20:05 GMT | Pensions News
By : Mark Richardson
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