The Department of Work and Pensions' latest pensions proposals published this week lack real consumer incentive to bridge the retirement savings gap, say industry experts.
In its consultation paper entitled Simplicity, security, and choice: informed choices for working and saving, Andrew Smith, Secretary of State for Work and Pensions, says the government is now looking at both increasing and improving the flood of ‘pension’ information to consumers.
But while better information might help clear the fog around retirement planning, Rachel Vahey, pensions development director at Scottish Equitable , questions if this would actually encourage people to start saving more.
"The proposals are a positive step forward. On the other hand, will providing people with more information actually make them start saving more?" says Vahey.
Andy Fleming, press officer for the NAPF agrees better information for consumers will only have a limited impact unless the fundamental issues are addressed, such as the difficulty people have in understanding how State benefits work.
That said, he believes there are some very positive ideas outlined in the DWP paper, in particular when it comes to the proposal on automatic enrolment into occupational pension schemes.
"This is something we have been proposing for a while," says Fleming.
The introduction automatic enrolment can be seen as a step towards compulsion. However, Adrian Boulding, pension strategy director at Legal & General, do not think people will feel forced to stay in a scheme if they don't want to, but says the idea is rather to allow people to actively think about saving for a pension before they opt out of a scheme.
The National Consumer Council says it also supports the proposal to increase information on employee's pensions, as it could be promoted on the back of the proposed pension protection fund, which will protect employees’ pension rights when firms go bust.
And Stewart Mason, manager of industrial affairs at Clerical Medical, hopes automatic enrolment could be a forerunner to incorporate pensions into employees benefit packages. This might lead to a reduction of pay rises, he says, but do not think that will be a problem as he believes people will recognise the need for pension provision.
The DWP suggests a review of regulations is required because current rules inhibit employers from encouraging employees to join their scheme - a move which Mason is very pleased to see.
"The big thing for me is the suggestion that employers might be able to promote their own pension schemes. This is very upbeat when it comes to redress the pensions savings gap," he says.
Despite much of the positive feedback from the industry on the general proposal, the industry at the same time believes the government's latest ideas are pretty bland. So far, the proposals have been a bit like "kite-flying", Vahey says, as it seems like the DWP is awaiting the arrival of the 'proper proposal' - the Pension Bill - before making any real commitments.IFAonline
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