The majority of IFAs say the current state pensions system needs a fundamental overhaul, according to research from AXA.
The research claims 72% of IFAs want to see an overhaul, 83% saying the system it is too complicated for consumers to understand and only 3% believing it should be left as it is.
Steve Folkard, head of pensions and savings policy at AXA, says the research demonstrates that even the experts believe there are fundamental problems with the current state pension system.
“The greatest concern is the complexity of the system; and how that makes it more difficult for advisers to make recommendations to consumers who may be impacted by means testing or the Pensions Credit," he says.
When asked which changes IFAs would support, 64% want S2P to be abolished with the saving to fund a more generous state pension.
Folkard says: “By making the basic state pension universal, it will meet the needs of some of society’s most disadvantaged people.
“It is for the government to decide what constitutes an adequate level of state pension, but we advocate a more generous level than currently paid to provide a sufficient pension for low and average earners, carers and those with incomplete contribution records as well as those not in paid employment.
“By abolishing S2P and contracting-out funds could be directed to fund this more generous universal pension”.
The research also suggests 54% of IFAs support removing contracting-out all together and 72% want the qualifying rules for the basic state pension to be simplified. Around 17% feel the system is too complicated to advise clients on whether they should contract-out of the S2P.
Folkard adds: “A clear distinction between the role of the state and the private sector is needed to encourage those who are able to take a greater responsibility for their own retirement to do so."
The research also asked for views on how the current system of means-tested benefits affects the pensions advice provided. It claims 59% said it makes it very difficult to provide clear advice, particularly for those on average, or below average, incomes while 33% feel it complicates the advice process for almost all clients.
Looking ahead, 67% of IFAs expect the state pension to remain the same or to have declined in value by 2015, while 23% expect the state pension to still be means tested.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].com.IFAonline
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