The U.K.'s National Association of Pension Funds today proposed an overhaul of the nation's pension system that would include a new state pension fund, additional employer contributions and a new independent commission “to take the politics out of pensions,” according to a news release.
The plan, titled “Fit for the Future — NAPF's Vision for Pensions,” is designed to complement a raft of pension reforms by the U.K. government scheduled to begin in 2012.
Among the NAPF's proposals is a new state pension fund formed by combining two existing funds — the basic state pension and the state second pension. The new state Foundation Pension would aim to raise the average state pension benefit by about £25 ($37) a week to £8,000 annually. “It would provide a solid floor on which to provide workplace pensions,” according to the release.
Employers would be encouraged to provide a core defined benefit pension plan to give members “the certainty of a guaranteed level of benefit without the risks of DC,” according to the release.
Another proposal would involve a mandatory increase in employers' pension contributions to 11% of a qualified employee's salary, from 8% currently required by law. At 11%, the average employee would receive a retirement income of about a third of earnings compared to about 25% at the lower level of contributions currently.
In a bid to ensure “the health and longevity of workplace pensions,” the NAPF also suggested establishing the Retirement Savings Commission to oversee the pension system.
Mark Brooks, spokesman for the NAPF, could not be reached for comment by press time. The NAPF represents U.K. pension funds with a total of about £800 billion in assets.
Officials at The Pensions Regulator, which oversees occupational pension funds in the U.K., and the Confederation of British Industry, a lobbying group representing U.K. companies, also could not be reached for comment.