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Advisers&#39 warning to Pickering on axing indexation

IFAs are warning that the removal of indexation on pensions, as recommended by the Pickering review, would have seen consumers miss out on a 76 per cent increase over the last 15 years.

Under Pickering&#39s proposals, employers would no lon-ger be obliged to index pensions against inflation, leading IFAs to warn it that will downgrade pensions in the eyes of the public.

Research by Hargreaves Lansdown reveals that a pension pot worth £10,000 in 1987 would now be worth £76,000 today because of indexation.

But Pickering wants to leave it to employers whether to offer the bells and whistles of index-linking and spouses&#39 benefits in an attempt to stem the flow of closures of definedbenefit schemes.

Advisers have welcomed the increased flexibility that employers will have in offering final-salary schemes but warn that public perception of the value of pensions is critically low and they fear that pensions risk becoming even further unvalued.

Pickering says: “In the past, pension promises have been imposed by Parliament and politicians. They should not attempt to micro-manage pensions – it is for employers and employees to design the pension they want.

“We have adopted a fortress mentality, protecting those in the pensions fortress. I want to reduce the entry fee to get in.”

Hargreaves Lansdown pensions development manager Danny Cox says: “Without taking into account the high inflation of the late 1980s, taking away index-linking and spouse benefits effectively reduces the value of a defined-benefit pension by a third.”

Richard Jacobs pensions & trustees director Richard Jac-obs says: “Pickering does not realise what a big joke pensions have become. The big loser from Pickering&#39s report is the industry as it downvalues pension benefits.

“The day Pickering and the Treasury are prepared to give up their index-linking, the rest of us might consider it.”

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