National Association of Pension Funds wants government to simplify pension reforms and cut tax relief for rich

Generous tax breaks for wealthy pension savers should be slashed in the next budget to save the exchequer millions of pounds and simplify complex rules on retirement saving due next year, says an industry lobby group.

The National Association of Pension Funds (NAPF) is urging the government to adopt a fairer and simpler approach to pension taxation, following rule changes that the employer-funded group says will unintentionally ensnare many middle-income staff.

Chief executive Joanne Segars warned that already complicated pension tax regulation was due to be tangled further by rules restricting tax relief for workers earning more than £150,000.

Last year the chancellor said a 50p tax rate would apply to earnings over £150,000 from April. He also said income tax relief on pension contributions by individuals would be tapered from 50% at £150,000 a year to 20% at £180,000, from 2011.

Current rules allow tax-free pension contributions up to a threshold of £245,000.

Segars said the generous tax break forced the government to draft complex anti-avoidance rules to prevent individuals from diverting income into their pensions. She argued it would be simpler and fairer to lower the tax-free threshold to a range between £45,000 and £60,000.

"As recession-hit companies assess the cost and complexity of the pension they offer their employees, the government must abandon its unworkable pension tax plans, which will only damage pension provision in the round," she said.

"Our approach to pensions taxation will avoid the arbitrary and unfair effects of the government's proposals – too many people outside the government's target income group are at risk of facing high tax bills just for saving in a pension scheme."

According to the NAPF, employers have complained that staff on middle incomes who receive temporary benefits in kind, such as relocation expenses, will be hit.

The NAPF, which represents employers with assets of more than £700bn, also joined calls from local government employers for an independent commission to examine funding shortfalls.

The London Pensions Fund Authority (LPFA) warned that attacks on the local government pension scheme, which has assets of £120bn, were undermining wider public confidence. Anthony Mayer, chairman of the £3.5bn LPFA, said a commission would be established with the sole remit of ensuring the long-term sustainability of the scheme.The commission would also have the power to demand increased contributions or changes to payments in order to solve funding shortfalls in the long term.

The measures would take decisions which could reduce payments to a council's employees out of the hands of local politicians.

Mayer said public sector schemes were suffering from the "politics of envy" and needed to defend themselves from attacks by ill-informed commentators.

"There is a growing body of opinion that over time the unfunded liabilities of LGPS [local government pension schemes] will have to be picked up by the taxpayer unless the fund is closed. This is a nonsense," said Mayer.

"The LGPS will always be sustainable – if contributions into the fund and/or pensionable retirement ages are increased sufficiently and/or by reducing benefits, such as adjusting the indexation of pensions increases," he said.

Pension funds across the private and public sectors are wrestling with the effects of longer-lived employees, while the volatility through the financial crisis has made it clear that schemes cannot rely on markets to solve the problem for them.

The LPFA proposal comes as the main political parties prepare for a general election, expected in May, where pensions paid to public employees could come under scrutiny.

National Association of Pension Funds wants government to simplify pension reforms and cut tax relief for rich

Generous tax breaks for wealthy pension savers should be slashed in the next budget to save the exchequer millions of pounds and simplify complex rules on retirement saving due next year, says an industry lobby group.

The National Association of Pension Funds (NAPF) is urging the government to adopt a fairer and simpler approach to pension taxation, following rule changes that the employer-funded group says will unintentionally ensnare many middle-income staff.

Chief executive Joanne Segars warned that already complicated pension tax regulation was due to be tangled further by rules restricting tax relief for workers earning more than £150,000.

Last year the chancellor said a 50p tax rate would apply to earnings over £150,000 from April. He also said income tax relief on pension contributions by individuals would be tapered from 50% at £150,000 a year to 20% at £180,000, from 2011.

Current rules allow tax-free pension contributions up to a threshold of £245,000.

Segars said the generous tax break forced the government to draft complex anti-avoidance rules to prevent individuals from diverting income into their pensions. She argued it would be simpler and fairer to lower the tax-free threshold to a range between £45,000 and £60,000.

"As recession-hit companies assess the cost and complexity of the pension they offer their employees, the government must abandon its unworkable pension tax plans, which will only damage pension provision in the round," she said.

"Our approach to pensions taxation will avoid the arbitrary and unfair effects of the government's proposals – too many people outside the government's target income group are at risk of facing high tax bills just for saving in a pension scheme."

According to the NAPF, employers have complained that staff on middle incomes who receive temporary benefits in kind, such as relocation expenses, will be hit.

The NAPF, which represents employers with assets of more than £700bn, also joined calls from local government employers for an independent commission to examine funding shortfalls.

The London Pensions Fund Authority (LPFA) warned that attacks on the local government pension scheme, which has assets of £120bn, were undermining wider public confidence. Anthony Mayer, chairman of the £3.5bn LPFA, said a commission would be established with the sole remit of ensuring the long-term sustainability of the scheme.The commission would also have the power to demand increased contributions or changes to payments in order to solve funding shortfalls in the long term.

The measures would take decisions which could reduce payments to a council's employees out of the hands of local politicians.

Mayer said public sector schemes were suffering from the "politics of envy" and needed to defend themselves from attacks by ill-informed commentators.

"There is a growing body of opinion that over time the unfunded liabilities of LGPS [local government pension schemes] will have to be picked up by the taxpayer unless the fund is closed. This is a nonsense," said Mayer.

"The LGPS will always be sustainable – if contributions into the fund and/or pensionable retirement ages are increased sufficiently and/or by reducing benefits, such as adjusting the indexation of pensions increases," he said.

Pension funds across the private and public sectors are wrestling with the effects of longer-lived employees, while the volatility through the financial crisis has made it clear that schemes cannot rely on markets to solve the problem for them.

The LPFA proposal comes as the main political parties prepare for a general election, expected in May, where pensions paid to public employees could come under scrutiny.

Older women are one of the most vulnerable demographic groups in the US, and the recession is not helping their plight

I had lunch a while ago with some elderly ladies at a senior centre in Manhattan. Their lively conversation and bawdy personalities made it feel like an episode of the Golden Girls. But as I listened to them bemoan the cost of the meal ($2 a piece) and watched as they stood in line for the take home goody bag, which contained little more than bread and milk, it became apparent that the reality of the golden years for these women is vastly different than their fictional counterparts.

In fact older women, many of whom find themselves single either because a husband died, divorced them or failed to materialise in the first place, are one of the most vulnerable demographic groups in the country and the recession is not helping their plight. Those already in retirement have seen their assets diminish as health costs soar.

One such lady, an 89 year old bombshell called Joy (all the women I spoke with asked me not to disclose their last names) warned me to think twice before I buy that pair of boots I don't need as "someday you'll wish you had that money".

For women on the cusp of retirement, particularly those with only their own income to rely on, the situation is no better. Since 2007 the unemployment rate among women over 55 has almost doubled and their chances of finding new jobs are as minimalist as the social security checks that await them.

Yvonne who is now 67 lost her job in 2006. She was 62 then so eligible to claim social security but her monthly payments are approximately 32% less than she would have received had she been able to hold out until the normal retirement age of 66. She is scraping by at the moment with the help of food stamps and intermittent unemployment checks but lives in fear of losing her apartment. A reasonable fear considering her monthly social security payment of $898 leaves her $75 short on her rent.

Cassandra who is 62 knows all about not being able to make rent. Her husband died in 2004. Two years later she was injured in a car accident and lost her job. For seven months she had no income whatsoever. She was evicted and spent most of last year living in a homeless shelter. Now Cassandra receives disability payments of $750 a month and has trouble affording basic essentials like toiletries (and I'm not talking expensive anti-wrinkle creams.)

Sadly these women are not outliers. According to the census bureau 17% of all single women over the age of 60 have incomes below the federal poverty level (a ridiculously low figure of $10,830 per year). An additional 19.9% are living on less than $16,000 a year (ie between 100 and 150% of the federal poverty level.) All told, approximately 37% of single women over 60 are poor.

It's no surprise really that women do so badly in retirement as the odds are neatly stacked against us. We work fewer years than men due to care-giving duties and get paid less for our troubles. On the flip side we tend to live longer, though it would be nice to be able to afford toilet paper and what not in those bonus years.

In June 2009 the Women's Institute for a Secure Retirement (Wiser) released a blueprint (pdf) to help women make their "income last as long as they do". The key is to earn as much as you can during your lifetime and invest it wisely – easier said than done of course while the economy is in tatters. The alternative is to marry well, divorce better and if all else fails take Joy's advice and think twice before you buy those boots.

Older women are one of the most vulnerable demographic groups in the US, and the recession is not helping their plight

I had lunch a while ago with some elderly ladies at a senior centre in Manhattan. Their lively conversation and bawdy personalities made it feel like an episode of the Golden Girls. But as I listened to them bemoan the cost of the meal ($2 a piece) and watched as they stood in line for the take home goody bag, which contained little more than bread and milk, it became apparent that the reality of the golden years for these women is vastly different than their fictional counterparts.

In fact older women, many of whom find themselves single either because a husband died, divorced them or failed to materialise in the first place, are one of the most vulnerable demographic groups in the country and the recession is not helping their plight. Those already in retirement have seen their assets diminish as health costs soar.

One such lady, an 89 year old bombshell called Joy (all the women I spoke with asked me not to disclose their last names) warned me to think twice before I buy that pair of boots I don't need as "someday you'll wish you had that money".

For women on the cusp of retirement, particularly those with only their own income to rely on, the situation is no better. Since 2007 the unemployment rate among women over 55 has almost doubled and their chances of finding new jobs are as minimalist as the social security checks that await them.

Yvonne who is now 67 lost her job in 2006. She was 62 then so eligible to claim social security but her monthly payments are approximately 32% less than she would have received had she been able to hold out until the normal retirement age of 66. She is scraping by at the moment with the help of food stamps and intermittent unemployment checks but lives in fear of losing her apartment. A reasonable fear considering her monthly social security payment of $898 leaves her $75 short on her rent.

Cassandra who is 62 knows all about not being able to make rent. Her husband died in 2004. Two years later she was injured in a car accident and lost her job. For seven months she had no income whatsoever. She was evicted and spent most of last year living in a homeless shelter. Now Cassandra receives disability payments of $750 a month and has trouble affording basic essentials like toiletries (and I'm not talking expensive anti-wrinkle creams.)

Sadly these women are not outliers. According to the census bureau 17% of all single women over the age of 60 have incomes below the federal poverty level (a ridiculously low figure of $10,830 per year). An additional 19.9% are living on less than $16,000 a year (ie between 100 and 150% of the federal poverty level.) All told, approximately 37% of single women over 60 are poor.

It's no surprise really that women do so badly in retirement as the odds are neatly stacked against us. We work fewer years than men due to care-giving duties and get paid less for our troubles. On the flip side we tend to live longer, though it would be nice to be able to afford toilet paper and what not in those bonus years.

In June 2009 the Women's Institute for a Secure Retirement (Wiser) released a blueprint (pdf) to help women make their "income last as long as they do". The key is to earn as much as you can during your lifetime and invest it wisely – easier said than done of course while the economy is in tatters. The alternative is to marry well, divorce better and if all else fails take Joy's advice and think twice before you buy those boots.