Scottish Equitable is calling for a full industry debate on compulsory pensions to deal with the per...
Scottish Equitable is calling for a full industry debate on compulsory pensions to deal with the perceived failure of stakeholder.
In his latest Ritchie Paper, Stewart Ritchie - Pensions Development Director at Scottish Equitable - says there are still three options, the most favourable of which could offer employers tax breaks or incentives for contributing to an employee's private pension.
According to Ritchie, the three options are:
to leave things as they currently are with limited compulsion for employers and employees through State
Earnings Related Pension Scheme (SERPS) and its replacement State Second Pension (S2P);
increase compulsion, but this is unlikely to be popular with either employers or individuals; and
soften the compulsion burden by offering carrots and sticks to employers, perhaps through the current tax system, as an encouragement for them to contribute to employees private pension provision.
However, before a decision on compulsion is reached, says Ritchie, people must beware of jumping to conclusions and how success should be measured.
"We are seeing a knee-jerk reaction in favour of private pension compulsion as a means of overcoming the perception that stakeholder is not succeeding in the way the Government might have liked," says Ritchie.
"But we should not be too quick to label stakeholder as a failure. It is still early days and it would be wrong to measure the success of the Government's initiative solely on the number of stakeholder sales. Success must be measured by the overall increase in private pension provision across the board. The key to achieving this is a significant employer contribution.
"Even if the conclusion is that more must be done to raise the level of private pension saving, the industry must fully debate the questions of compulsion, both pragmatic and philosophical. In doing so we must explore all other possible options that might effectively be used to achieve the aim of better pensions for all," adds Ritchie.
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