Kevin Rowan column

Dec 19 2005 By Kevin Rowan, The Journal

Many people are unclear about what their income in retirement will be. Increasing numbers of people are not only not saving for any kind of pension provision, they haven't even started thinking about it yet.

When Adair Turner presented his report a couple of weeks ago, many people, it seems, have assumed that this means their pensions are now taken care of. If only!

The fact that there was an attempt to undermine Turner's report in the days before publication is a worry.

And we all witnessed the disparate views of the Prime Minister, the Chancellor and the new Work and Pensions Secretary after the report. Since then, pretty much silence has ensued. We can only hope the Government machinery is working on how we actually make some changes to the pensions system to avoid further crises.

I was pleasantly surprised by much of what Turner has recommended. We already knew that the commission thought the current voluntary system was "not fit for purpose" and could have expected radical surgery to be proposed.

Their analysis was very clear, stating that "voluntary private pension provision is not growing: rather it is in serious and probably irreversible decline. Employers' willingness voluntarily to provide pensions is falling and initiatives to stimulate personal pension saving have not worked." At last, it seems, someone has smelled the coffee.

Nonetheless, I was still surprised when the commission recommended compulsion through its `National Pensions Savings Plan'. A scheme which will see employers making a contribution of 3% of salary costs, employees adding 4% and a further 1% from tax relief making 8%.

While employees would be able to opt out, employers would not (without meeting criteria which would equate to them providing an equivalent minimum pension contribution). The total savings could be more, the TUC recommends 15% of earnings, but the principle of compulsion is accepted.

This would be huge progress.

And on state pensions the commission recommends index linking to earnings. This would help to reverse the trend that has seen state pensions becoming less and less valuable to those in retirement, with an increase of means-tested benefits to replace the lost value.

There's much good to be said about the Turner Report and its recommendations.

What we don't know though, is how many of the recommendations are going to become actions.