With the general election tipped for next month, Simon Falush, Investment Week pension correspondent...
With the general election tipped for next month, Simon Falush, Investment Week pension correspondent, begins a series of interviews with the pensions spokesmen for the three major parties in the UK.
This week Jacqui Lait, the Conservative shadow minister for pensions, outlines her party's thinking on stakeholder, annuities, regulation and the role of independent financial advice.
How successful do you think stakeholder has been?
We certainly won't get rid of stakeholder. It has had a beneficial effect in terms of charges. But for people earning under £20,000 with a family, it will be extraordinarily difficult for them to save for a stakeholder pension and Labour has as good as admitted it.
You have this rather nice distinction from Jeff Rooker about the difference between the actual market and the target market. The market is the non-working spouses, children and grandchildren, the target is people earning under £20,000 a year.
Alistair Darling said he didn't want to see any form of concurrency because it would create tax breaks for the rich, and what they've done is create precisely that.
The real test is how popular the take-up is from employees. It may be popular for highflying new entrants coming into the workforce people earning up to £20,000 by the age of 21 or 22 may be the people who will take up stakeholder. But I question very much whether people earning up to £20,000 with a family or who are married would find it worthwhile.
We're scrapping the double taxation on savings. If you save, you buy the savings product from earned income and then you pay tax on the income from it. We're going to scrap the tax on the income from savings. That's a much easier incentive for tax free savings.
Yes, we will abolish the compulsory requirement to buy an annuity at 75 but we would need everybody to guarantee an income sufficient to keep them off state benefits. For many people, an annuity is a good thing, it enables them to plan what their income is going to be. So we could ensure that people buy an annuity to make up the difference between Basic State pension and state benefits.
We would like to give more freedom for people to invest their pension funds in other ways, which can make it easier for them to provide a stream of inheritance for their children and a greater pot of money to provide for long term care so its not necessary for them to sell their home.
By simplifying regulations for pensions you take huge amounts of cost out of both Government and companies. People would find it less easy to say "it's far too complicated therefore I won't". That would be another way of expanding the market and you'd be likely to see more products going forward.
By relaxing requirements for annuities there may be a boost in the market for other products. People may be able to realise capital they've got invested in other ways, more people may take insurance to pay for long-term care, which at the moment is very expensive, but if the market was expanded you could come up with more competitive products.
If we simplify the system then pensions should become more attractive. The change of attitude is similar to that of the drink driving or no smoking campaign. You have to make it so simple that people want to provide for themselves.
We're saying to the under 30s, "you can contract out of your Basic State pension payments and put that into your own pension fund". They will be able to put in the portion of National Insurance that is pension related, it will be between £500 and £1,500 per year. They wouldn't get a Basic State pension, they would get an enhanced pension. But should their pension fund not provide an income as high as the State pension, the state would make up the difference.
The Government Actuary has made a rebate calculation that's not a good one. It's not advantageous at the moment to contract out.
The trouble with this Government is that they're sending out mixed messages. On the one hand they want everybody to provide for themselves with stakeholder, but stakeholder doesn't appeal to the people who most need a pension. Then they change Serps into State Second Pension but they are condemning people to stay on that because they won't be able to afford to move to stakeholder.
This means that a lot of people won't try to increase their incomes and so won't go in to the private sector. Another disincentive to investing in a pension is the Minimum Income Guarantee, which means that people on a low income may well be better off not providing for themselves at all.
In this country we regulate the selling and the product, most countries regulate one or the other. Part of the problem is the complex regulation. There is confusion where regulations are not clear or where new regulations supersede old ones. We need a set of clear regulations that are rigorously enforced and we ought to be able to clear out a lot of unnecessary regulation.
That's something we'll have to look at when we're in Government, we may be peculiar in this country and need a conjunction of both.
You've got the FSA and Opra. One does occupational pensions and one does personal pensions. Stakeholder is being regulated by the FSA even though much of it will be occupational.
I put it forward to combine the two and it was rejected but we'll have to wait and see whether there's a coherent view or whether it will lead to confusion.
We want to encourage people to take charge of their own money rather than getting involved in complex applications for state help. We would like to see IFAs to be part of the educational and attitude changing process. This requires societal change which is driven by government and the industry.
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