Alistair Darling should consider making changes to government bond issuance in order to benefit pension plans.
This is the view of the National Association of Pension Funds (NAPF), which made its official submission to the chancellor prior to the Pre-Budget Report on December 9th.
Mr Darling will deliver a range of new financial policies to parliament on this date, including possible changes to tax rules.
NAPF believes that, if the issuance of bonds is "skewed" towards longer-term and inflation-linked debt, pension fund income will increase.
This is because yields on the bonds, many of which would be held by pension funds, would likely rise.
In the same way, lower bond yields going forward would lead to a deterioration of fund finances – potentially resulting in savers retiring on disappointingly low incomes.
This group would then become more likely to consider alternative sources of income, such as equity release schemes.
Joanne Segars, NAPF chief executive, said: "Pensions have been placed under considerable strain during the recession and the government has a golden opportunity next week to improve the retirement security of millions of workers paying into their company pension.
"It’s an opportunity the chancellor cannot let pass by."
Posted by Tom Papworth
