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CBI – state pension reforms will bring 'clarity and certainty' to retirement saving

The CBI has responded to the Government’s White Paper, The Single-Tier Pension: A Simple Foundation for Saving, on state pension reform.

The business group backs moving to a single tier system. And it welcomes proposals to protect private sector employers from the increases in National Insurance Contributions from the abolition of contracting out final salary schemes from the State Second Pension.

Neil Carberry, CBI Director of Employment and Skills Policy, said:

“The current state pension is confusing and complex. Big rises in life expectancy and long-term pressure on public finances mean we must get more people saving for old age.

"These reforms will give real clarity and certainty about how much retirement income people will get from the state and how much they need to save privately through auto-enrolment schemes.

"It is right that the changes will protect state pension entitlements built up before the reforms kick in. Businesses have been concerned about the financial impact of abolishing the National Insurance rebate for contracting out defined benefit schemes.

"They will be pleased that the Government has put a plan in place to deal with this. The rebate is in place to recoup the National Insurance owed to employers by the state for paying the Second State Pension on its behalf. 

"The changes will only be acceptable if employers with defined benefit schemes are not left worse off.”


1. The Government published its state pension reform proposals in a Green Paper in April 2011. In the Queen’s Speech in May 2012, the government promised to legislate to introduce the changes.

2. Automatic enrolment into private pensions started to be phased in from October 2012 – eventually covering all workers in the UK; aged between 22 and the state pension age; and earn more than £8,105 a year.

3. The CBI published its response to the Green Paper, in June 2011. The key recommendations were:

  • its preferred option for reform would be moving to a single-tier pension based on the contributory principle;
  • it could not support any reform that did not fully mitigate the ending of contracting out defined benefit schemes from the State Second Pension – by allowing employers to offset the increase in their National Insurance Contributions; and
  • an independent review mechanism was the best vehicle for future changes to the state pension age.


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