David Hare, President-Elect of the Institute and Faculty of Actuaries (IFoA), comments on the publication of the Department for Work and Pensions (DWP) White Paper on State Pensions Reform.
“Yesterday’s white paper puts forward radical proposals to the present state pension system which if implemented should provide much needed clarity for individuals planning their retirement income, thanks to the proposed single flat rate state pension of £144 a week and what will effectively be an end to means testing, which was often cited as a deterrent to saving. These proposals work well alongside auto-enrolment, which should be fully implemented during 2018.
“However as always the devil is in the detail and there are losers in these proposals, most significantly employers who have provided a contracted-out staff pension scheme to help their employees fund their retirements. These employers will face an increase in NI contributions of 3.4% per scheme member under these proposals, while each member would also face an NI increase of 1.4% unless these rules are amended.
“The proposals also include a recommendation that the State retirement age is linked more firmly with longevity data. Whilst it is true that we are living longer, data also shows that we are not necessarily living healthier lives. A stronger link to longevity data could therefore have unintended consequences. The Institute and Faculty of Actuaries in conjunction with the Pensions Policy Institute (PPI) published research in 2012 on extended working lives and data suggests that there are many issues that need to be addressed if such policies are to be successful.
“Pension reform is essential and the Institute and Faculty of Actuaries looks forward to working with the Government and helping to address the challenges involved in the detailed implementation of the proposals, in particular the end of contracting out and stronger links with longevity data.”
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