Adair Turner used the final report of his government panel to suggest Prime Minister Tony Blair’s government establish a National Pension Savings plan where employees would contribute at least 5% of their incomes, matched by a 3% employer match, Bloomberg reported. That and a raft of other suggestions in the Turner Commission report would represent the biggest overhaul of Britain’s pension system since World War II.
To implement the new pension, the Turner panel said that the percentage of national income spent on pensions should rise to about 7.7% from 6.2% between 2020 and 2050, possibly requiring tax increases. The British newspaper The Guardian reported late last year that together the Turner proposals would require a 4% income tax hike to the current 22% rate.
Under the Turner panel’s plan, all workers would automatically be enrolled in the state plan if they are not already in a sufficiently backed company program (See UK Commission Favors Auto Enrollment ) and contributions by employers would be compulsory, although employees would have the right to opt out. Business lobbyists have repeatedly complained that the provision will add to companies’ costs and make them less competitive (See UK Pension Commission Proposal Suffers Another Attack ).
Tuesday’s report was the product of a study by the Turner Commission appointed by Blair to explore how to fill a 57 billion-pound ($99 billion) shortfall in retirement savings.
“It’s essential that there is a public debate over whether that long-term increase is acceptable,” Turner said Tuesday at a speech in London. “The government now faces the difficult challenge of deciding how far and how fast it can move towards the reform.”
In November, the Pensions Commission said Britain should increase the retirement age to 68 from 65 by 2050, raise pensions in line with earnings rather than retail prices, end means-testing of benefits and create a National Pension Savings Scheme funded by contributions from workers and employers (See UK Pensions Commission Releases Recommendations ).
More than a million UK local government workers went on strike on March 28 to protest against plans to raise their retirement age to 65 from 60.
One observer on Tuesday applauded the Turner Panel’s research efforts. “The UK’s State Pensions drastically needed an overhaul and the proposals within the various Turner Reports continue to make a lot of sense. It is now up to the Government to take on board the findings of the Commission and make the changes that are necessary to provide a sustainable State Pensions system, ” asserted Paul McGlone, Principal and Senior Actuary at Aon Consulting, in a statement.
A copy of the final report and supporting documents are available here .