It was disappointing to see Chris Hitchen of the National Association of Pension Funds attacking Paul Myners's view that standards of corporate governance need to increase in the UK (Letters, 28 September).

We have just suffered the biggest financial crash since the 1930s. A prime cause is that the owners of the banks and finance companies – that is, their investors – did nothing to stop them stoking up the speculative bubble that has now burst. Nor have they curbed the excessive growth in executive remuneration.

Pension funds are some of the more engaged investors, often thanks to member trustees, and it would be wrong to single them out for blame in what is a much wider failure. But Paul Myners is right to identify corporate governance as an issue, and it is depressing to see such complacency from some of our biggest investors.

Brendan Barber

General secretary, TUC

All parties look to means-testing to achieve spending cuts, but reforming pensions could save some serious cash

When it comes to public expenditure, welfare is the big one. Add the Department for Work and Pensions budget to the family tax credits and cash paid out by the revenue, and the combined total is £170bn – rather more than a quarter of public expenditure. So you might have expected that, amid the talk of retrenchment, all eyes would be trained on the bill for benefits.

The difficulty, though, is that with cash payments, unlike with state-provided services, there can be no possibility of doing more with less. Saving £1bn of the annual budget is straightforward – if you can point to a million families to take £1,000 a year away from.

When cuts are unavoidable, targeting has been the traditional way to go. Although the opposition parties grumble about Gordon Brown subjecting so many families to means-testing, it turns out their response would be to means-test his tax credits even more aggressively. That may sound incoherent, but in fact it is not. If the money is withdrawn more sharply as earnings rise, then payment ceases at a lower income level than at present, and so fewer people end up in the system.

Deeper cuts could be found by restricting benefits currently paid as of right to the poor. Child benefit is one potential target, although Nick Clegg's rapidly retracted promise that the Lib Dems would "look at" taking it off the rich illustrates the difficulties. The disability allowances that help with care and mobility costs have a £14bn budget, and could also be withdrawn from people above the breadline. But it goes without saying that this would be highly controversial – at least unless it were coupled to great improvements in social care.

It would be far more popular to save on unemployment by getting people into work, but that's not easy to do in a slump. Not long ago, the fashionable idea was that contracting-out the work of job centres to innovative private firms would ensure that people were placed more efficiently in jobs. When recession came, though, the contractors jacked up their fees. There are various welfare-to-work proposals that could make a difference, but most require cash upfront – cash the Treasury does not have.

The biggest expenditure of all is not unemployment but pensions. It consumes more than a third of the welfare budget, and is set to consume more as male baby boomers hit the age of 65 over the next few years. Accelerating the planned rise in the pensionable age, and perhaps pegging it to current life expectancy, is one move that really could soon start to save serious cash.

Tom Clark is the Guardian's social affairs leader writer

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Your interview (Too many UK firms fall into foreign hands, September 24), reports that City minister Lord Myners would "summon" the National Association of Pension Funds (NAPF) to a meeting to discuss what he perceives to be a lack of resources – and therefore commitment – on the part of occupational pension funds to raise standards of corporate governance. We are always happy to discuss matters with Myners and will be happy to do so again.

The NAPF is, and always has been, an "active driver of effective ownership", as the minister is aware – we actively engage with investee companies and our corporate governance guidelines are used by a leading voting agency. We see this as an integral part of building value for, and providing pensions to, scheme members, which is, after all, what pension funds are there to do.   

Pension funds' priority is to ensure that they are able to pay pensions to their members. This alone presents many challenging issues, especially in the current environment. Government policies have forced pension schemes to close and they grapple with ever-growing deficits out of UK equities – to the extent that pension schemes now own less than 15% of the UK market. It is ironic indeed, then, that government now wants to call on pension schemes to be the saviours of capitalism.

Constructive comment – not unwarranted criticism – is what is needed from government.

Chris Hitchen

Chairman, NAPF

TUC deplores delay as 'employers retreat from providing decent pensions'

Employers today scored a victory in their campaign to delay a new retirement scheme for low-income workers after pensions minister Angela Eagle agreed to defer its implementation until 2016.

The scheme, due to phased in over three years from 2012, will be delayed by a year to give employers more time to cope with the higher costs and administration. Eagle, who was intensely lobbied by employer groups, said that small and medium-sized businesses would benefit most from the delays to personal accounts.

Unions said they were frustrated by the move at a time when millions of workers were denied a pension by their employers. A TUC spokesman said that the scheme was needed to help tackle the pensions crisis and waiting another year was "disappointing".

The Association of British Insurers warned that the delay would lead to lower savings and accused Eagle of botching the scheme and putting its success at risk.

Personal accounts are designed to cover the estimated nine million workers currently without access to a pension. Under the plan, employers will be forced to automatically enrol staff into the scheme and contribute 3% of their salary. Employees will contribute 5%.

The government agreed to phase in personal accounts over three years from 2012 and set up an agency, the Personal Accounts Delivery Authority, to implement the plan.

Critics of personal accounts argue that the contribution rate from employers was too low for many low-income workers to generate retirement incomes that would escape means-tested retirement benefits. In Australia, where a similar rule exists, employers must contribute a minimum 9% of income.

The National Association of Pension Funds said this week that a joint contribution rate of 10% should be adopted by employers to generate decent pensions compared with the 8% under personal accounts.

Eagle said the government remained committed to the plan, which is due to begin testing next year. "

The TUC spokesman added said: "It is obviously disappointing that the new system will not be fully operational until 2016. We understand there are practical issues that need to be discussed about its implementation, but the pensions crisis is getting worse with every day that employers retreat from providing decent pensions. This measure means that many workers will go for too long before they can start building a pension under the new rules."

Fall in bond yields and proposed new EU rules contribute to rush, pensions experts say

Workers nearing retirement are rushing to buy annuity plans before they tumble in value, pension experts said today, adding that a collapse in bond yields and proposals for tough new EU rules had led to the spike in demand.

Annuities, which guarantee a retirement income for life, are expected to start falling after a period of calm in the market once insurers include the costs of the sharp drop in bond yields over recent months.

Hargreaves Lansdown, the UK's largest independent financial adviser, said rates have "marginally fallen in the last few weeks" and falling gilt yields "could see sliding rates gathering momentum".

Nigel Callaghan, pensions analyst, said: "The surge in the stock market has seen many people bringing their retirement plans forward. Investors are nervous about fund values falling again and want to take risk off their retirement table."

The Financial Services Authority (FSA) also warned that annuity rates will be hit by new EU rules governing how much capital is set aside by insurers to cover annuities, which industry analysts believe could push values down by a further 20%.

Jon Pain, the FSA's managing director of retail markets, said at a pension summit on the weekend that the demands from Europe for a "liquidity premium" would force insurers to increase the price of annuities, which in turn would dramatically cut their value to customers. He predicted severe damage to the industry unless it succeeded in its lobbying efforts to head off the EU Solvency Directive, which is due to take effect from from 2011.

He said: "The directive poses a significant risk for the pensions market. The nub of the issue arises from the question of whether the legislation will allow firms to continue to take into account a liquidity premium in capital provisions for annuity business. In simple terms, if the implementing legislation does not allow for it, annuity providers are likely to have to significantly increase the capital they hold and as a result increase the cost to consumers."

A concerted lobbying effort by the Treasury, the FSA and the Association of British Insurers has so far had little effect on opinion in Brussels. EU officials have little sympathy for implementing exclusions that would support private sector annuity providers, including Prudential and Aviva. Most continental countries are untouched by the directive. They provide the bulk of their pensions through state guaranteed pension systems that pass solvency tests without the need for extra capital.

The Association of British Insurers recently warned that the industry would be crippled by the amount of capital annuity providers would have to hold if the Solvency II proposals went through. It said the amount could equal the current market capital of the entire industry.

The benchmark annuity rate for a 65-year old man with a £100,000 fund has remained at £7,171 a year since July. According to Hargreaves Lansdown, the rate, which strips out indexation and a widows pension, has begun to fall in recent weeks as gilt yields, which were at historic highs in the months following the collapse of Lehman Brothers, fall further.

If the EU's solvency directive remains intact, annuity rates could drop below £6,000. Some insurers have indicated they would pull out of the market altogether if the directive went ahead, because it would result in a collapse in demand from consumers.

Barclays, IBM and Fujitsu also targeted over pay and pensions

A wave of industrial action in the financial and IT sectors over pay and pensions will kick off tomorrow and Thursday with a strike at a Capita call centre in Glasgow that handles customers for insurance group Pearl.

Workers will picket the centre after rejecting a 1.5% pay offer. The union Unite said it expected local MPs and MSPs to join the protest and demand a "fair pay rise".

Barclays, IBM and Fujitsu are also expected to come under attack from staff over the next couple of months following a breakdown in talks over the summer. All three closed generous final salary pension schemes to existing employees and switched them to cheaper arrangements this year. Staff at Barclays voted nine to one for industrial action.

Unite accused Capita of pleading poverty in talks over pay while promising bumper pay packages to directors. National officer Rob MacGregor said: "Capita staff are being forced by their employer to accept an insulting pay offer while their chief executive, Paul Pindar, awards himself a package worth £9.8m. This hypocrisy by Capita, at a time when the staff in Glasgow are bringing the company good profits, is truly shameful.

"Capita have repeatedly ignored the legitimate concerns over pay. How can a company, which increased operating profit by 18% to £320m last year and increased the dividend payment to shareholders by 20%, not be able to give its staff a cost-of-living pay rise?"

Pindar made share option gains amounting to almost £9m last year, taking his pay and benefits from £901,000 in 2007 to £9.8m in 2008. Operations boss Paddy Doyle saw his pay package soar from £706,451 in 2007 to £2m last year.

MacGregor said: "Unite members believe that Capita is simply using the economic downturn as an excuse to deny their staff the reward they have earned. The pay offer of 1.5%, when contrasted with the huge bonuses being paid out in the Capita boardroom, is nothing short of insulting."

Capita played down the dispute, which it said affected between 90 and 100 workers in its Bothwell Street office in central Glasgow from a workforce of 9,000 across its call centre businesses. It pointed to recent figures from pay research firm IRS showing that private sector pay rises averaged 0.9% in the three months to May this year.

A spokeswoman for Capita said: "Like many businesses, and particularly those operating in the financial services sector, Capita Life and Pensions has remained mindful of the need to remain competitive and the majority of the 9,000 other staff in the business have understood this."

The bill for providing gold-plated pensions for Britain's leading bosses will come to hundreds of millions of pounds more than their companies are estimating, according to research by the Guardian.

A survey of FTSE 100 employers found that outdated figures used in company accounts disguise the bill for funding executives' retirement incomes, in several cases by more than £5m each.

The finding follows the row over Sir Fred Goodwin's pension earlier this year when the former boss of Royal Bank of Scotland was allowed to retire at 50 on a pension of £703,000 a year – which would have cost £30m rather than the £16m provided for in the bank's accounts. Under rules applied to workers' pensions, Barclays would need to set aside £19.5m to pay for the £572,000 a year due to its chief executive, John Varley, and not £12.3m shown in the bank's 2008 accounts.

Tesco would need to find £14m more than the £12.1m in the company's accounts to pay for the £775,000 a year pension promised to Terry Leahy, the 53-year-old boss of the supermarket giant. The final bill for funding directors' pensions could come to several hundred million pounds more than currently budgeted across the FTSE 100. This means companies will have to find the cash for bosses' retirement income out of future profits.

The revelation follows years of cuts in pensions for workers. While top bosses can retire on pensions worth hundreds of thousands of pounds, the average employee's retirement income is less than £8,000 a year. Employers have closed final salary schemes to new workers and increasingly shut them to existing staff. There are also millions of workers who are excluded from workplace pensions by their employers.

The general secretary of the TUC, Brendan Barber, said: "Top directors have put a ticking timebomb into many of Britain's biggest companies. It is unacceptable that the boardroom can get away with this attempt to disguise the huge gap that has opened up between the pension of top directors and those of their staff."

A deficit of more than £180bn has opened up in staff final salary schemes among the 7,400 employers that still operate them. Most of these schemes are closed to new entrants and staff must join cheaper arrangements.

Pension experts said that while employers were following official guidelines for reporting executive pensions, they continued to apply an outdated formula that artificially depressed the cost of providing them.