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What needs to be done?

Issue date

We need a Pensions Partnership. Government, employers, and employees all need to act now, and act together. Here are our recommendations.

what government should do

The state retirement pension should once again be linked to increases in earnings or prices, whichever is the higher

The average pensioner currently gets 60% of their income from the state and 40% from other pensions. Both major parties say they want to reverse these figures, and put more responsibility on to individuals and their employers for their pension.

This is why both say the state pension - which is still the foundation of most people’s pension - should only go up in line with prices, not wages as it used to. But that means it will wither away.

We welcome many of the new benefits that this government is now paying to the poorest pensioners. But today’s workforce needs to know that a decent state pension will be available to all - making benefits means tested remove incentives for people to save now.


what employers should do

Employers should be under a legal obligation to contribute to their staff pensions starting at 4% and rising to 10% over time.

The rash of employers who have ended final salary pension schemes have hit the headlines in recent months, but this is not a new trend. These high quality schemes are usually being replaced by new schemes where employers are putting less in and the value of the pension depends on how well investments perform.

Some points that employers make are genuine concerns -such as the impact of FSR17 - a new accounting standard that requires employers to produce a statement about their pension liabilities depending on a single day’s stock market valuation. But these are often excuses for cost cutting encouraged by City investors. The trend away from final salary schemes started well before FSR17.

And of course the vast majority of employers make no contribution to employee pensions, even though every employer with more than five staff now has to provide access to a stakeholder pension. 81% of employees back compulsory employer contributions according to a TUC poll.


what employees should do

Employers should be able to make employees contribute to their pension scheme (providing it’s a quality scheme with good employer contributions) as a condition of employment.

Employees need to play their part in providing for their retirement too. While government and employers are trying to shift an unfair and impossible level of responsibility to employees, we should expect to pay a fair contribution - around half of what the employer pays.

Employees also need to understand their pensions, and have a responsibility to participate in the management of their pensions. Pensions are not the only way of saving for retirement. More needs to be done to educate people about pensions.
 
fair for all

Pensions need to be much fairer. Too many pensions arrangements depend on an outmoded view of the male breadwinner supporting a traditional family. Professional men are much more likely to have good pensions than anyone else.

Many women will not get a full state pension because they have not made enough National Insurance contributions. They may have missed out on contributing to an occupational pension because they worked part time -although union pressure now means part timers can join schemes. Even if they have a pensions pot they suffer from reduced annuity rates.

Too many schemes only pay survivor’s benefits to spouses and exclude unmarried and same sex dependants.

further reading

The TUC's full report, Prospects for Pensions, is available to browse online, or download as a pdf file (252KB file) .Alternatively, you can buy a printed copy in the TUC online bookshop.

 

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