Better late than never:  Movement on pension reform is welcome news says IoD

Friday 12th May 2006

It is welcome news for all of us that the Prime Minister and Chancellor are finally reaching an agreement on how to tackle the UK’s increasing pension’s crisis; although the IoD has been urging the Government to move the pension’s crisis further up the political agenda for months.

We urgently need to simplify an overly complex and unfair pensions system whilst encouraging our future pensioners to save.

Therefore the IoD proposes:

• a progressive reduction in Stamp Duty on equity transaction for pension funds;
• a boosting of the incentives of later retirement by linking longer working lives with the size of the tax-free lump sum. The IoD proposes boosting the incentive for longer working lives by increasing the size of the tax-free lump sum that can be withdrawn from a pension fund on retirement. The proposal is that the tax-free lump sum (25% at present) be increased by 5% per annum for each year worked beyond the state pension age up to a maximum of five years (i.e. a maximum tax-free lump sum of 50%).
• closure of public sector defined benefit schemes to new entrants;
• annual publication of total future liabilities of public sector schemes;
• a gradual raising of the retirement age to 70;
• an end to means testing for the State Pension by setting a new universal level at £110.

We look forward to hearing the greater detail on what the Government will actually do in the weeks ahead.