The government is being urged to strengthen the state pension as company pension schemes falter.

The National Pensioners Convention (NPC) has called on the government to strengthen the state pension system in light of the latest reports casting doubt on the future of decent company pension schemes.

The call comes as Aon announced it was halving its pension contributions from 12 per cent to six per cent and figures reveal that pension fund deficits now affect 64 per cent of the country’s 200 biggest pension schemes.

The NPC has criticised successive governments for relying on good-quality occupational pensions as a way of avoiding having to pay a decent state pension. But this approach is now unravelling.

At least 75 per cent of final salary occupational pensions have been closed to new entrants and the current economic crisis is estimated to have wiped £200 billion from pension funds, finds the NPC.

The average private pension pot will eventually give a single man of 65 an annual income of £1,960. A pension pot of £100,000 will give you a yearly sum of just £4,500.

Dot Gibson, NPC general secretary, says, ‘If we are serious about giving everyone a decent income in retirement, we must end the over-reliance on private occupational pension schemes that are governed by a volatile stock market.

‘The pensioners of tomorrow – just like today’s pensioners – need security, and that will only come when we recognise that the state is best placed to provide it through a living state pension that ends poverty in old age.’

The NPC is calling for the state pension to be set above the official poverty level of £165 a week for all men and women and linked to earnings or prices (whichever is the greater).

This could be financed through a number of measures, including using the surplus in the National Insurance Fund, which currently stands at £47 billion, abolishing the upper earnings limit on national insurance contributions, which would raise at least £8 billion a year, and scrapping higher rate tax relief and reducing tax avoidance (through tax havens) on private pension contributions, which could provide up to £40 billion a year.

Further reading:

Are politicians better off in retirement?
The utopian dream of early retirement
The future of SIPPs
Personal Accounts explained