UK: How is the coalition doing on pensions?
1 - What do you think of the coalition government's approach to pensions so far?
2 - Do you think pensions reform is likely to result in more people saving for retirement?
3 - Which pensions issues would you like to see tackled as a matter of priority during the rest of 2010?
Society of Pensions Consultants
1. I would give the coalition a cautious thumbs-up with the caveat that it is still very early days. They have appointed an experienced and informed pensions team, who have wasted no time in starting to review a number of the problematic issues identified by the pensions industry. They are also actively conducting a dialogue with industry experts, which should give them a good understanding of current problems.
2. I don't think there is any doubt that the 2012 reforms will - at least initially - result in an increase in the number of people saving for retirement. However, will this be achieved at the expense of a reduction in the average level of benefits for those currently enjoying membership of their employer's arrangement? There are serious unresolved issues around the administrative burdens that will be placed on employers wanting to continue with their current, usually more generous, arrangements; if these issues are not satisfactorily resolved, there is a genuine risk of widespread dumbing-down. If the new system is not quickly seen to be working effectively to the benefit of members, it will have a negative effect on public confidence, and the initial increase in involvement will evaporate, to be replaced with further cynicism which is likely to take another generation to turn around.
3. Specific issues that need to be addressed urgently include the surplus repayment restrictions under section 251 of the 2004 Pensions Act, the uncertainty around the need to equalise guaranteed minimum pensions, and the administrative burdens to be placed on employers who want to continue to run their own arrangements after 2012. There is also an urgent need to settle a sensible basis for tax relief on pension provision for high-earners; this must be justified on a clear objective basis that those affected will understand and see to be equitable, which may include reference to the present economic situation.
1. I have been amazed at the energy with which the new government is approaching the pensions challenge. Some commentators have criticised the government for moving too far too quickly. I do not share this view; all the big ideas are already out there and what we need is swift action in order to make up for lost time. I hope the way forward will be clear by the end of September.
2. I am heartened by the holistic approach which the government is adopting. Never before have we looked at all the ingredients simultaneously. One of the government's over-riding aims is to create an inclusive society where it pays to work and pays to save. The basic state pension has a crucial role to play in providing cohesion within and between the generations. An employee benefit and commercial product whose aim is to provide us with an income stream in later life will still be relevant in future decades. However, pension saving should not be the only form of saving that we encourage.
3. We need a labour market that is blind to age; the abolition of the default retirement age is a massive step in the right direction. We need a universal taxpayer financed state pension which provides a guarantee against absolute poverty in old age. The state pension is the weak link in our system and unless we remedy this, private sector provision built on an inadequate state foundation will always be shaky. Third, we need a market for retirement saving which is lightly regulated and based on the acknowledgement that employers and providers will always know more about pensions than employees or customers. Whitehall and Westminster should not design pension products.
Independent pension consultant
1. The coalition is making promising comments and moving - albeit slowly and tentatively - in the right direction. Lots of consultations, talk about improving the basic state pension and reducing means testing, scrapping default retirement age, encouraging savings, improving pension flexibility and scrapping age 75 annuitisation all sound good but let's see what actually happens.
2. Unless there is a radical shake-up of the state pension so there is no mass means-testing in the state pension system, it will be difficult to encourage low or moderate earners to save in a pension. The reforms announced so far are unlikely to be sufficient to ensure many more people saving for retirement but they are an improvement on the direction of policy in the past few years.
3. I would like to see a radical simplification of the state pension; a wholesale shake-up of the annuity market with the Financial Services Authority ensuring that providers are not permitted to offer default annuities nor allowed to take any commission unless purchasers have had help or advice to consider the vital questions that need to be thought about before buying the irreversible annuity. We need to rethink retirement, encouraging part-time work in your sixties and seventies, so there is a phase of life when people are cutting down, not stopping work altogether and their pension savings can be used to supplement income, rather than totally replace it.
1. Disappointing - they are tinkering at the edges and there does not appear to be a coordinated strategy. They need to look at the bigger picture.
3. We need to engage in a debate where conflicts of interest are clearly understood and reforms are driven by the need to make it pay to work and make it pay to save.
In addition, remove the enormous restrictions on the shape of pension scheme design allowing more collective arrangements to emerge which offer greater efficiency and less volatility, while respecting the needs of sponsors for a certain cost.