‘Stuck’ on stakeholder scheme
The 1999 annual survey by the UK National Association of Pension Funds (NAPF) reveals that the uncertain environment in terms of government policy is the main reason why occupational pension schemes are unwilling to make changes.
The survey is based on the responses of 527 organisations which operate around 700 pension schemes in both the public and private sectors.
Only 12 schemes, 3% of the survey, changed their benefits structure last year, compared with 7%–10% over each of the last five years of the NAPF survey.
There is huge uncertainty among fund managers about the stakeholder pension, which the government is planning to introduce by April. More than 70% of respondents said they did not know if they would apply to be registered as a stakeholder scheme. More than half were unsure about setting up a scheme parallel to their main one.
Ann Robinson, NAPF director general, says: “The government has legislated stakeholder pensions in a very broad way. We have the framework but we do not know the crucial details, which are the ones on tax and national insurance contribution.”
The proposed state second pension is planned to be introduced in two parts, making schemes redesign difficult. “The government’s latest paper on this issue is too complicated,” says Robinson. “Employers are stuck and they’ll be stuck for the next few years.”
The uncertainty is also affecting investment decisions. The report shows a very low impact of the euro in UK investment portfolios, with more than 90% of both private and public sector schemes saying they are not planning to change their investment strategy in the light of the European single currency because they don’t know what will be the UK’s position.
The trend towards index funds has been increasing, with almost half of the schemes admitting having indexed part of their portfolio.
One-third of final salary schemes and almost 40% of money purchase schemes would be prepared to make compulsory scheme membership a condition of employment if allowed. Paula Garrido