By Jenne Mannion The Government is likely to encourage lower paid workers into stakeholder with refo...
By Jenne Mannion
The Government is likely to encourage lower paid workers into stakeholder with reforms to the Minimum Income Guarantee (MIG), according to Scottish Equitable's Stewart Ritchie.
Ritchie, pensions development director at the group, said any changes could have massive implications for intermediaries selling stakeholder pensions.
He said answers given in parliament last week by pensions minister Jeff Rooker and social security secretary Alistair Darling, suggested the Government was looking to change the qualifying parameters for the MIG.
Under the current parameters, Ritchie said it would be wrong to promote stakeholder to the lower paid group within the Government's target group.
Ritchie gave a simplified current example under the parameters for retirement income at today's money value. He says a person at the lower end of the earnings scale who saves to pay money into a stakeholder pension, may be entitled to a stakeholder pension of £5 per week at retirement. If that person has a negligible Serps record, and receives the state basic pension of roughly £67 per week, the combination of their stakeholder and state basic pension would equal roughly £72, whereas the MIG would be £75.
Ritchie said: "Therefore that person would receive the MIG of £75, regardless of whether they had scrimped to contribute to stakeholder, or if they had done nothing at all. For this group, contributing to stakeholder is money down the drain."
Employers must offer stakeholder to those earning over £3,432pa after launch in 2001. Ritchie said: "It is difficult to see how it could be right for these people to accept an invitation by their employer to join stakeholder, under the belief they are doing the right thing for their retirement, and then, under the current parameters for MIG, be no better off.
"The answers given in Parliament last week hinted that there may be changes to the parameters with the end result being that the same person in this example may be able to receive some or all of their stakeholder pension on top of the MIG."
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