date: Thursday 12 December 2002 embargo: 00:01 Monday 16 December 2002

Attention: Personal finance, political and industrial correspondents. Pensions media.

Facing up to the Pensions Challenge - Joint Statement by the TUC, Consumers’ Association and Help the Aged

Britain is facing a pensions crisis.

The basic state pension is not keeping up with living standards. Employers are retreating from final salary schemes and their contributions to money purchase alternatives are much lower. The government is seeking to shift the burden of pension provision from the State to private saving.

Individuals are asked to contribute more and more - because their employers are contributing less - and are bearing more of the risk of pension provision.

Urgent action is needed. If the Government fails to meet the pensions challenge squarely then today’s workers will retire in poverty.

The government is shortly to produce a Green Paper on pensions. Our joint statement sets out some tests that the Green Paper must pass.

All three organisations agree on a broad agenda, if not on every policy detail. This starts from a realisation of the problems we face, and an agreement that solutions must be based on a shared responsibility between the individual, the state and employers.

• The Green Paper must construct a secure framework for pensions that allows people to plan for retirement with confidence, and enables the retired to maintain a decent standard of living and participate fully in society

• The Government must give an unequivocal commitment to maintain the basic state pension as the foundation stone of the UK’s pensions system. The state pension should guarantee a reasonable minimum income for all pensioners. More should be done to help the oldest pensioners (particularly the over 80s) who are also the poorest pensioners

• The Government must recognise that employers and employees who can afford to do so must play their part in providing for retirement. The simplest and most effective way to do this will be to phase in compulsory pension contributions from employers and individuals

• There must be greater choice and flexibility so the individuals can decide when they want to retire. Far too many people over 50 are now outside the labour market and believe that they have no reasonable prospect of employment. This must change and we look forward to legislation outlawing age discrimination. Employees should also be free to work beyond their normal retirement age if they so wish. They should be able to claim a pension from their employer and continue working reduced hours for that employer

• Pensions regulations should be simplified to make it easier for employers to provide pensions and for individuals to understand the pensions system. Similar regulatory requirements should apply to final salary and defined contribution arrangements. The number and complexity of money purchase arrangements should be reduced, building on the model of stakeholder pensions. Individuals must find the system simple to understand and flexible enough to meet their needs

• The Green Paper must contain proposals to widen access to pensions advice and information

• The pensions system must reflect today’s social realities, not an outmoded view of the male breadwinner supporting a traditional family. The low paid, part timers and women are poorly served by the current pensions system. The low paid - mainly women - usually suffer the most from current pension arrangements. The new arrangements must deliver fairness for the most disadvantaged

• Part of the process of simplification demands new pension schemes established on a regional or sectoral basis. This will make it easier for employers, particularly small and medium sized firms, to offer high quality pensions to their employees. New schemes also demand new governance arrangements. We believe that the trust-based structure of final salary schemes is a good model of governance and we favour an equal number of employer and employee trustees

• Rebuilding the UK’s pensions system on a secure foundation requires wide consensus and a commitment to long-term policy solutions. We believe that the government would benefit from the assistance of an independent body that could give authoritative advice, undertake expert analysis and offer solutions to specific problems. We believe that the establishment of an institution that has the support of all stakeholders will help to ensure that a durable pensions settlement is established

John Monks, TUC General Secretary, said: ‘Britain's pensions crisis runs deep, and requires urgent action. The Government must take notice of this wide coalition with so much in common.’

Sheila McKechnie, Director, Consumers' Association, said: "The pensions system is in desperate need of a radical overhaul and requires urgent, focused and persistent government attention. With an increasing shift away from state provision, the crisis can no longer afford to be treated like a political football. The Government needs to remove policy decisions on pensions from political interference and work with all stakeholders to build a new pensions structure for all consumers. If it fails the standard of living for consumers in retirement will be reduced to a mere gamble on the stock market."

Mervyn Kohler, Head of Public Affairs, Help the Aged, said: ‘This coalition between three very different organisations demonstrates the consensus that our pension system needs urgent reform. The Government’s Green Paper must take major positive steps towards creating the foundations of a more secure future for all.’

Notes to Editors:

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Contacts:

TUC: Ben Hurley: Tel: 020 7467 1337 Pager: 07626 317903 BHurley@TUC.ORG.UK

Consumers’ Association: Miranda Watson: Tel: 020 7770 7062 Mob: 07970 132 811 miranda.watson@which.co.uk

Help the Aged: Ben Harding: Tel: 020 7239 1941 Mobile: 07730 912524 ben.harding@hta.org.uk

Press release (1,000 words) issued 16 Dec 2002