With the election campaigns well under way and the pros-pect of Labour being returned to power, voters will be dis-appointed to find out that there is nothing in the Labour Party’s manifesto, other than a few platitudes about want- ing a sustainable system, about pensions.The Turner review is due to report in the autumn and voters have a right to know what the Government intends. Former economic adviser Ed Balls maintains that compulsory pension saving is years away and would not be brought in during the next Parliament if Labour is elected. He said recently that any change would only be brought in after a full debate on the Turner review’s findings, due later this year. The Conservatives have pointed out that Balls’ comments contradicted recent remarks made by Leader of the House Peter Hain that change would occur “sooner rather than later” and Shadow Work and Pensions Secretary David Willetts accused the Government of allowing pensions policy to descend into chaos. Willetts says: “Gordon Brown’s closest ally says a Labour Government would wait at least four years before doing anything about the pension crisis. Pension policy requires stability and a clear long-term strategy. Instead, Labour are changing their story from one day to the next.” The Liberal Democrats maintain they are the only party being clear about their plans. They have pledged to introduce a citizen’s pension based on residency, not contributions. Pensions spokes-man Steve Webb says: “Labour is betraying pensioners and treating the electorate with contempt by delaying these announcements until after the election. If they have a Pens-ions Bill ready to go, why will they not present proposals to voters? The electorate has a right to know what they are choosing.” There are many who would agree wholeheartedly so why is there nothing in Labour’s manifesto on pensions? It is right that Turner’s findings should be debated but common sense dictates of the options put forward by Turner in his initial report leaving pensioners in poverty, increasing the retirement age, raising contributions, increasing tax to pay for better pensions or a bit of everything, compulsion looks more or less inevitable. The only question is, when will it be introduced? It is difficult to understand why the Government seems so opposed to compulsion, particularly since a large proportion of the general public does not seem averse to the idea. Those who are already saving for their retirement are in favour of compulsion because it would have little or no effect on them. They are already contributing more than any minimum level likely to be introduced with compulsion. More important, they resent the fact that while they are being res-ponsible, roughly half the working population gets away with making no contributions towards their retirement inc-ome, relying instead on free, means-tested benefits. Pension credit might be free in the hands of the recipients but it is the responsible taxpayer who foots the bill. Surveys show, too, that a large proportion of those who save nothing for retirement are aware that they should be doing so and many would welcome enforced contributions to a pension scheme. Compulsion will only work, of course, if employers are forced to contribute as well as employees. Any government will be wary of introducing such a change for fear of burdening companies with extra costs and pushing some businesses, largely smaller companies, over the financial edge. But compulsion was introduced in Australia in 1991 and there is little evidence of companies or the economy suffering as a result. There is an overwhelming factor in favour of compulsion costs. It would be possible to reduce or do away with tax relief if pension contributions were compulsory. Brown rightly identified tax relief on pensions as a fundamental inequity. With only half the population benefiting from private pension savings – whe-ther occupational or personal pensions – and the richer half at that, tax relief on contributions and the tax-free roll-up of pension investments is a huge subsidy by the poor for the benefit of the relatively rich. Once you accept this ines-capable fact, compulsion not only looks attractive on a cost basis but it also looks like the only fair course of action. Let us get on with it. It would, of course, be a bonanza for IFAs and the pension industry generally but that is another matter.
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IFAs have been warned to cover their backs by reviewing every with-profits policy held by their clients, as failing to switch policies could be deemed as bad as selling them. O&M Systems director Graham Miller says IFAs who do not have evidence that they have reviewed whether to switch all with-profits policies could be in […]
Baring Asset Management has been called greedy after saying it is likely to follow Credit Suisse and Threadneedle in raising management charges.
Nationwide is launching new lower rate fixed rate mortgages.The new rates are available from April 22 and reflect current movements in the money markets.The two year fixed rate is available from 4.95 per cent from its previous rate of 5.19 per cent. The three and five year fixed are available from 5.09 per cent from […]
We know what it takes to run a successful auto-enrolment project in the retail industry. We are automatically there for some of the world’s best-known retailers at every stage of the process. Take a look at what we have done for our client House of Fraser.
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