The UK Trades Union Congress (TUC) has told the government that its Green Paper on pension reform is not enough. The TUC told the government today, in its submission on the document that far more needs to be done. In particular, it favours compulsory employer contributions to employee pension plans.
The TUC is pressing for further action in three other areas. First, it wants more protection for plan members when pension schemes are wound up, including immediate implementation of the government’s proposal for increased consultation rights. Secondly, it wants the taxpayer-funded state pension to average wages rather than retail prices, since wages increase faster than prices – to which it has been linked since the Thatcher reforms of the 1980s. Thirdly, the TUC would like to see a new occupational pensions regime that ensures schemes can meet their obligations through solvency insurance and a new Pension Protection Fund akin to the Pensions Benefit Guaranty Corporation in the United States. (It also wants at least half of pension fund trustees to be nominated by members.)
The TUC also criticises limited proposals in the Green Paper on improving pensions for women. It opposes the idea of raising the age at which people can draw a pension from 50 to 55, and the raising of the public sector pension age from 60 to 65. Most of the TUC’s clientele work in the public sector.
However, the TUC does back Green Paper proposals to increase flexibility in moving from work to retirement; the idea of setting up a Pensions Commission; and the replacement of the controversial Minimum Funding Requirement (MFR) introduced in the wake of the Maxwell defalcations a decade ago, and which is widely criticised for distorting asset allocation.
More predictably, the TUC warns that simplification of the pension system should not be at the expense of the low paid. It argues that the tax simplification advocated by the Green Paper will disproportionately advantage the higher paid. Which is why the TUC rejects the idea, advanced by some parts of the pensions industry, to replace the State Second Pension with an index linked state retirement pension.
“There are many useful and practical ideas in this wide ranging Green Paper,” says TC General Secretary-elect Brendan Barber. “Only a few of its proposals present real difficulties. But its central problem is that it is simply not radical enough to deal with Britain’s pensions crisis. Yet governments are always slow to move and I suspect many in government know that much more is needed. This is why we will be stepping up our campaign for a new pensions settlement based on a partnership between employers, employees and the state.”
The TUC response specifically rejects the idea of replicating the American 401(k) system in the UK. “We do not believe that it will increase pensions coverage in the UK, and that this can only be achieved through the introduction of compulsory employer contributions to all workers pensions,” says the TUC