An Amicus press release says some pretty blunt things about pensions and the lower paid:
Lower paid and part time workers could find themselves having no option but to pay up to twice as much into defined contribution schemes or through the government's stakeholder scheme in order to even have a chance of earning the same proportion of pension as higher paid workers who are more likely to be members of final salary schemes.
They also spot the tax issue:
Amicus is [sic] also wants an urgent review of the pension tax relief system which currently pays out £14 bn of tax relief every year but with half of that amount being paid to the top 10% of earners.
Roughly to achieve a pension of 50% of final salary will take a 15% annual contribution to a defined contribution scheme. With an average employer contribution of 6% and tax relief at 23% that's a perceived 7% cost.
Compare that to a 60ths final salary scheme with a 5% employee contribution for a top rate (40%) tax payer. That gives a two thirds pension for a perceived cost of 3%. Fantastic. It is indeed astonishingly regressive.
It seems to me that the main purpose of tax breaks for pension contributions should be to minimise the burden on the state of the retired. If that is indeed the accepted goal then the current system is an abysmal failure.
What do they want done?:
Amicus is campaigning on four key changes to the Pensions Bill to help restore people's confidence and to ensure people save over their working lives towards their retirement: setting minimum compulsory contribution levels for employers and employees, giving pensions the same legal protection as pay under TUPE, a legal requirement for meaningful consultation for pension scheme members and equal numbers of employee and employer pension trustees within schemes.
I'm not sure why they don't suggest a flat rate of tax relief, I'm surprised but actually pleased that compulsion is on their agenda, the TUPE rules seem naturally fair, the consultation requirements are, from this article, vague and the pension trustee requirement seems rather modest.
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