Pensions and politics make uncomfortable bedfellows.

Over the decades, successive governments have introduced new legislation - always with the best of intentions, but rarely with the best of results.

If you think about it, this is hardly surprising.

Anyone entering the workforce today could expect to work for 40 years or more, before receiving a pension which, if they are lucky, could cover a 30 or 40 year retirement.

Politicians, however, tend to have more immediate horizons. Their object is to win elections, which are rarely more than four years apart.

For the first time since the 1970s, politicians on all sides are waking up to the fact that the UK’s creaking pension system needs fundamental reform

There are no short term political gains to be made by long term changes to the pension system.

And, while politicians have repeatedly tampered with Britain’s pensions system, they have rarely been prepared to make difficult long-term decisions.

But those decisions are now becoming inescapable.

Living longer

For the first time since the 1970s, politicians on all sides are waking up to the fact that the UK’s creaking pension system needs fundamental reform, and the report of Lord Turner’s Pensions Commission, due at the end of November, is expected to set out options for such reform.

To get an idea of what needs to be done, it’s important to understand how we found ourselves in this position in the first place.

One key factor is that we are all living longer.

This is, of course, good news. But it does mean that if we are to enjoy a decent income in retirement, we either need to retire later, or save more, or some combination of the two.

Yet, at a time when we should be saving more, pension saving has suffered a series of blows.

Successive governments have introduced layer upon layer of red tape for employers who offer their staff pension schemes - adding to costs, and making the UK pensions system the most complicated in the western world.

Downturn

The government has a Better Regulation agenda, and pension regulations are among the most on the statute book.

The UK pension system is crying out for someone to slash away at red tape.

One of Gordon Brown’s first moves, in 1997, was to harvest 5bn a year from company pension schemes, and the downturn in stock markets from 1999 onwards affected pension funds as much as any other investors.

The result is that we find growing numbers of employers cutting back on pension provision for their employees, or even getting out altogether.

This in turn means tomorrow’s pensioners are in danger of facing a longer retirement, with less funding. It’s been estimated that the gap between what we are saving, and what we need to save, is some 27bn a year.

People want a simpler, fairer system, which does not penalise women who have taken work breaks

Last year’s Pensions Act aimed to help restore consumer confidence in pensions by setting up the Pension Protection Fund, a safety net for those whose employers go bust with an underfunded pension scheme.

No one would argue with the principle of greater security for pension scheme members.

But the Act did little to address the fundamental long term weaknesses in our pensions system.

Citizen’s pension

Back in 2002, the NAPF published a policy paper, “Pensions - Plain and Simple”, which set out our ideas on the route forward.

At the heart of this was the abolition of widespread means testing in state retirement provision.

Women could be better off under a citizen’s pension

Means testing acts as a disincentive for people to save and fails, on the latest available figures, to deliver much needed pension benefits for up to a third of those poorer pensioners who are entitled to help.

We proposed the introduction of a simpler, fairer Citizen’s Pension, which would provide a more secure guarantee against poverty in later life, and lift up to 10 million future pensioners off means tested benefits.

Instead of the present tangle of state pension benefits, the Citizen’s Pension would give everyone a basic, adequate state pension payment of 109 a week at today’s prices.

It would be paid on the basis of UK residency, rather than National Insurance contributions, like the present system, which penalises many pensioners - particularly women - who have taken work breaks to raise families.

Our research shows that these proposals reflect the pension priorities of consumers.

People want a simpler, fairer system, which does not penalise women who have taken work breaks, and which does not subject millions of pensioners to means testing.

The Citizen’s Pension meets these criteria, and makes the whole pensions landscape much clearer.

The “deal” from the state is 109 a week; for anything above that, you have to save through a workplace pension or other savings arrangements.

The new system would reduce pensioner poverty, provide a far simpler state pension system on which to build additional savings, and would be fairer to millions of women, carers and others who miss out under the current system.

Advice

We also made another proposal which would help maintain a robust future for our pensions.

One of the reasons the UK pensions system is in such poor health is that decisions have too often been taken without the benefit of independent advice aimed at ensuring long term continuity and sustainability.

We think an independent Pensions Standing Commission would provide this advice, based on the depth of understanding and knowledge of its members.

There is much to be said for an independent voice helping to inform politically important decisions, and a Pensions Standing Commission could bring vital qualities of and expertise to the important process of pensions decision making.

Since our original proposals for a Citizen’s Pension were published three years ago, the debate on pension reform has moved on .

GUIDE TO UK PENSIONS Facts and figures outlining the depth of the UK pensions crisis At-a-glance

The principle of a simple, adequate, state pension, available to all, is now widely accepted among opinion formers in the pensions, political and academic arenas.

We think a Citizen’s Pension would make tangible and affordable improvements to the retirement prospects of millions of Britons, and help establish a sustainable pensions system for the 21st century.

We hope Lord Turner and his colleagues will agree.

And, more importantly, we hope that politicians will be prepared take critical long term decisions in the interest not just of this generation, but of others to come.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

The firm believes the move will save more than 1m a year in National Insurance contributions.

A second subsidiary company will be established at the current Gourock base, which will be responsible for administrative and operational staff.

CalMac says it needs to cuts costs if it is to tender for the Clyde and Hebrides ferry routes.

The new offshore crewing company is expected to come into being in February.

CalMac said the move would not affect the pay and conditions of staff or lead to .

Lawrie Sinclair, managing director of CalMac, has written to all staff informing them of the decision and a 90-day formal consultation on the plan has begun.

This is bad news for the people of Scotland and for my constituents - it leaves users, crew and the islands no further forward Angus MacNeil SNP

His letter states: “CalMac has identified a management company based in Guernsey which can provide the corporate and administrative structures and services required to proceed with the proposed change to an off shore employment company for all of CalMac’s sea-going staff.

“The company, which would be a subsidiary of Caledonian MacBrayne Ltd, would be known as CalMac Crewing (Guernsey) Ltd and would be based in Guernsey.

“The contract that would be entered into would be between Caledonian MacBrayne Ltd and Clyde Marine Offshore Ltd, which is part of the Glasgow-based Clyde Group.”

Mr Sinclair added: “The arrangement detailed here enables Caledonian MacBrayne to offer an company and contractual structure, recognising the fact that these proposals are currently being progressed under the consultation process which is due to continue until the end of January 2006.”

However, Angus MacNeil, Scottish National Party MP for the Western Isles, said more than 200 CalMac workers who live in the isles were worried about the move.

He added: “This is bad news for the people of Scotland and for my constituents - it leaves users, crew and the islands no further forward.”

For Inger and her partner Pierre, having children was never a difficult choice.

“I’m entitled to 12 months off work with 80% pay, or 10 months with full pay. My husband is entitled to take almost all of that leave instead of me, and he must take at least four weeks out.

“Economic considerations never even crossed our minds when we decided to have children. It’s just not an issue. Of course that makes it easier for women to have more babies, it gives you an enormous freedom,” said Ms Sethov.

HAVE YOUR SAY A falling birth rate is a good thing. The planet is already overpopulated Claire, London Send us your comments

International travel is part of her work. Very few of the women in similar jobs she meets abroad have children.

“There is just a completely different level of acceptance among employers here. It is not uncommon to put a telephone conference on hold, because you can hear a baby crying in the background.”

High birth rate, high employment rate

The paid leave is guaranteed by the National Insurance Act, and dates back to 1956. Because the leave is financed through taxes, employers don’t lose out financially when people take out their parental leave.

The present system of 10 or 12 months leave with 100% or 80% pay was introduced in 1993. Since then, the fertility rate has been a steady 1.8 - higher than most European countries.

It is not uncommon to put a telephone conference on hold, because you can hear a baby crying in the background Inger Sethov

At the same time, five out of six women between the ages of 30 and 39 are in employment.

No government yet has stated that the aim of generous family policies is to increase birth rates. The main argument has always been to secure greater gender equality.

Marit Ronsen is a senior researcher with Statistics Norway. She thinks extended maternity and paternity leave, as well as state-sponsored day care facilities, probably do play a part when people choose to have children.

“We don’t have a strong, statistical here, but several analysis indicate a link.

“What it does mean, is that we have been able to maintain a relatively high birth rate. Many believe the family policies of this country are a necessity to keep that rate stable,” she says.

‘Daddy quota’

Fathers too are encouraged to take as much time off as possible, and must take at least four weeks leave or else those weeks will be lost for both parents.

This is known as the ‘daddy quota’, and the government has proposed to expand it with one more week.

Brage Ronningen has just finished his three months of ‘daddy leave’

Mothers must take the first six weeks after birth as maternity leave, but after that it is up to the parents to share the remaining leave as they wish.

Brage Ronningen has just finished his three months of leave. He works for a small company administering recycling of electrical goods.

“For us the decision to have our first baby did not really depend on our ability to enjoy a long, financially secure parental leave. But of course now I see how enormously beneficial it has been for all of us,” he said.

“And I think employers understand the benefits too. Even small companies see that they have to offer generous paternity packages to attract desirable staff. Many even offer more than they have to according to the law.”

FERTILITY RATE In Europe 2.1 children per woman is considered to be the population level. These are national averages Ireland: 1.99 France: 1.90 Norway: 1.81 Sweden 1.75 UK: 1.74 Netherlands: 1.73 Germany: 1.37 Italy: 1.33 Spain: 1.32 Greece: 1.29 Source: Eurostat - 2004 figures At-a-glance: National policies

Still, a generous family policy programme is no guarantee for a high fertility level, says Marit Ronsen at Statistics Norway. To illustrate her point, she uses neighbouring Sweden as an example.

“Sweden’s family policies have been at least as generous as ours. Yet their birth rates have not improved.

“Sweden experienced a period of slack in the economy that soon led to a sharp rise in unemployment. Soon after, fertility declined from 2.1 children per woman in 1992 to about 1.5 in 1997.

“In economically insecure times, people tend to postpone having children,” Ms Ronsen says.

Norway has enjoyed a steady economic growth since the early 1990s. Marit Ronsen believes it is a between that growth and the family policy that has kept the birth rates here on a steady high.

Total equality not here yet

Most here agree that Norway’s family policy does encourage more equality between the sexes.

Many also believe there is a direct link between the system and birth rates, even though there is room for improvement in order to reach the replacement rate of 2.1 children per family.

Inger Sethov believes there is only one way forward.

“The system will not be completely fair to women until parental leave must be shared 50-50 between mother and father, by law. Only then will women be completely equal in the work market, and perhaps then we will choose to have even more children.”

But it hasn’t exactly set the world alight.

Since the scheme was launched more than two years ago, only 1.5m pensions have been sold.

And while 350,000 employers have obeyed the law and set up stakeholders, 82% of them still have no members.

On the face of it, these figures show that many people just aren’t interested in pension planning.

But look at it another way.

If people had taken out stakeholders at the outset, they’d have found their investments falling.

That’s because most pension funds are invested in the stock market, and we all know

Pension investments have been hit by falling markets

how badly that has performed in the past couple of years.

So perhaps it was a good move to keep away from the scheme - and now the time might be right to start thinking again about a pension.

“There’s been a lot happening over the past couple of years that would have left investors unsure of what to do,” says Kerry Nelson of Onevoice financial advisers.

“Now, as markets start to strengthen, it would be a good time to review the decisions made several years ago.”

So why was it thought stakeholders would seem an attractive proposition?

Well, there are certainly benefits:

You can move your pension around if you wish.

But one complaint has been that few employers make contributions to their schemes - the latest figures show only 13% of companies chip in.

The wants workers to save for retirement

However, David Bishop from the Federation of Small Businesses says they shouldn’t shoulder the blame.

“All employers already contribute for their staff in terms of compulsory National Insurance contributions and those went up by 8% in this year alone,” he points out.

The insurance industry wants help to boost the take-up of the stakeholder products it sells.

It says more should be done to make companies promote their schemes.

It’s also calling for a tax break to enable employers to pay for financial advice for their staff.

Tory pensions spokesman David Willetts said: “What is the pensions surprise they have in store for the electorate?”

It comes as the Tories highlight plans for a tax cut for people who save for pensions - a plan branded unachievable by Labour and the Lib Dems.

Labour is waiting for a review on pensions policy. It says major changes could be debated at a future election.

‘Nasty’ surprise?

The Turner commission, appointed by the government to examine the issue, will not publish its final report until after the election.

Mr Willetts said people should know Labour’s position before they voted.

“Either they really don’t know or they have proposals so nasty that they don’t want anyone to know about them before polling day,” he said.

QUICK GUIDE Pensions

He also warned against Lib Dem plans for a citizens’ pension, based on residence rather than National Insurance .

Some ministers have appeared to the idea. Mr Willetts challenged them to guarantee the state pension would not be means tested if it was based purely on residence.

The Tories unveiled their latest pension plan on Sunday.

The changes won’t take place until well after the next election Alan Johnson Pensions Secretary Tories accused of ‘tax con’ Q&A: The pensions problem

For every 100 basic rate tax payers saved for a pension, a Tory government would put in an extra 10 using 1.7bn of the party’s promised 4bn tax cuts.

The incentive would come into force in April 2006 and is aimed at increase pensions contributions by a fifth.

On Monday, Tory leader Michael Howard told reporters: “If you save, we will boost your savings and if you help yourselves, we will help you.”

Mr Howard said he did not think it necessary to force people to save.

The party says it would not reverse Gordon Brown’s 1997 decision to scrap tax relief on pension fund dividends, which they have criticised as a 5bn a year “tax” on pensions.

‘Unaffordable’

Of the 4bn tax cuts promised, the Tories have already allocated 1.3bn for a council tax rebate for pensioner households.

Labour Pensions Secretary Alan Johnson said there would be no major pensions reform during the next Parliament.

Forcing people to save was being by the review, he told BBC 2’s Daily Politics.

“If they recommend that, and if we do choose to go down that route, we would seek a consensus around that and the changes won’t take place until well after the next election,” he said.

Mr Johnson said radical changes had to happen over a long period. Labour says Tory spending plans for pensions and other issues do not add up.

The Lib Dems say basing pensions on National Insurance, instead of residence, penalises women.

Only about 13% of women are entitled to a full state pension on the basis of their own contributions compared to 87% of men, it says.

Lib Dem pensions spokesman Steve Webb added: “The Liberal Democrats believe that scrapping means testing is a much better way of encouraging people to save for their retirement.”