government pensions reform green paper criticised for not tackling issue of savings gap
The ABI has called for more financial incentives for employers to encourage greater contribution to pension schemes in its response to the Government's Pensions Green Paper and Inland Revenue tax simplification proposals.
The consultation period for the Green Paper ended last month with a number of industry members criticising the Government's proposals, which have a target implementation date of April 2004. The industry still has until 11 April to respond to the Inland Revenue's proposals.
Many, like the ABI, noted there is an abundance of work to be done before any actual increase in pension saving will be seen.
Mary Francis, director general of the ABI, said: 'The Government has failed to introduce significant incentives to encourage more pension saving and without these incentives we will not see a step change in savings patterns,' she said.
Peter Thompson, chairman of the NAPF, said the Government has missed a golden opportunity to simplify the pensions landscape and boost future retirement saving.
While he welcomed measures to simplify the running of occupational pensions schemes, he said the proposals would do nothing to boost confidence in pensions by simplifying the complex state of the UK pension system.
Executive chairman for Norwich Union Life, Philip Scott, said the benefits likely to come from the current proposals will be insufficient to justify the expected substantial costs involved in their implementation.
The costs, he added, would ultimately be borne by the consumer. 'The principal of simplification is very much encouraged but will only succeed alongside further measures that encourage people to save,' he said.
Steve Bee, head of pensions strategy at Scottish Life, said the proposals constitute the most radical and helpful suggestions for simplifying pensions in the past four decades.
However, he added it is unfortunate the paper does not include issues affecting distribution, notably the increasing use of means tested benefits.
Pensions technical manager at Friends Provident, Chris Bellers, said employers should not be allowed to make membership of occupational schemes compulsory, especially as the proposals in the Green Paper will weaken the conditions under which schemes can contract out.
He said if employers were permitted to make membership compulsory and the Government went ahead with watering down the reference scheme test for contracting out, some employees could lose out.
'This is because those on modest incomes could be better off remaining in the State Second Pension, rather than joining a contracted out scheme providing minimal benefits. Also for the low paid, membership of the employer's scheme may merely reduce their means tested State benefits,' Bellers noted.
Thompson said what was and still is needed is a 'root and branch view' of pension coverage in the UK.
He added: 'The Inland Revenue succeeded in identifying radical and positive ideas for reform of the tax regime for pensions. I am disappointed that the Department for Work and Pensions has failed to take this opportunity to bring out an equally radical change in the wider pensions regime.'
The most radical proposals included in the Inland Revenue paper, issued last December, were to suggest a lifetime pensions limit of £1.4m, raise the retirement age to 55 and give greater flexibility on annuities.
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