The Rights of Savers Private Members Bill, put forward by Sir Malcolm Rifkind, and which included the introduction of a Savings and Retirement Account (SaRA), has finally been thrown out by the government.
First put forward in June last year, the Bill gained support from cross-party members, including MP Frank Field, and included the idea of a SaRA which planned to promote long-term saving by having a similar structure to an ISA but would operate under pension rules and regulations.
The proposal would have the added flexibility of giving access to funds before the age of retirement and according to Rifkind, the account would have targeted low- to middle-income earners and young people who want to save for the future but also want to be prepared for any changes in their circumstances.
However, despite the Bill getting through the Committee stage of the process at the end of 2005, during the Committee meeting almost every clause of the Bill was opposed by Stephen Timms, minister for pensions reform.
The minutes of the Committee reveal Rifkind said the Bill was unusual in two respects, as firstly it had received the unanimous endorsement of the House on the Second Reading, including several compliments from Timms, but secondly, now it was in the Committee stage, “the minister has tabled amendments that, without exception, without further debate or any question of amendment, will delete every clause” of the Bill.
However, Timms defended himself by saying his position and the amendments tabled in his name were entirely consistent with those set out at the Second Reading of the Bill.
He stated he was sympathetic to the objectives of Rifkind, and shared some of the aims he had set out, but added the government did not support the approach the Bill takes.
Timms pointed out although he welcomed the debate and the opportunity to consider in more detail the proposals of the Bill, and wanted the opportunity to have a constructive debate, as a useful reference point for the work taking place on pension reform, he said it would not be right for the Bill to proceed to the statute book.
As a result, although the Bill did make it through the Committee stage, the Bill has been given a non-sitting date for the report stage, which effectively means the Bill has been stopped.
Margaret Williams, spokeswoman for Sir Malcolm Rifkind’s office, says: “The Bill has been kicked into the long grass by the government. But hopefully some of the ideas will go through into the pensions debate. Although Sir Malcolm is no longer shadow work and pensions secretary, Nigel Waterson who worked on the Bill is still shadow minister for pensions, so there is still some continuity there.”
Tony Vine-Lott, director general of the PEP and ISA Management Association (PIMA), who helped develop the idea of a SaRA, says it is no surprise the government has opposed the Bill.
He says there were there parts to the Bill, the SaRA, income drawdown and a review of the annuity market, adding while it seems the government was not averse to the proposals for a SaRA, it was less happy with the proposals for income drawdown and annuities.
Vine-Lott says: “We are still very positive about our proposals and we’re hoping they will be part of the pensions review going on at the moment as our proposals were designed to be acceptable to the general public.”
He says this is why SaRA was designed on the basis of an ISA, but with added pension benefits, as there are currently 16 million people saving in ISAs who should be saving in pensions.
Vine-Lott adds: “There is something very appealing about an ISA, and there is far more certainty with a locked-in ISA, as at the end, the money is yours, there is no tax to pay, no annuity to buy and you can do what you want with the money.”
He adds this is why he prefers the SaRA, as its more appealing to the target market than the National Pension Savings Scheme (NPSS), or the alternatives put forward by the Association of British Insurers (ABI) and the National Association of Pension Funds (NAPF), will give people much more flexibility.
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 Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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