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Crumbling consensus

Money Marketing revealed this week that the Conservatives are seriously considering developing a flexible lifetime savings vehicle, warning the Government’s recent delay to auto-enrolment “casts a shadow” over personal accounts.

At the Tory Party conference in Manchester, Shadow pensions minister Nigel Waterson revealed he and his colleagues are furious they were not consulted on changes to auto-enrolment timeframes.

He said: “I think that does cast a real shadow over the whole project.”

Industry experts believe the auto-enrolment delay has focused Tory minds on radical changes to the scheme. Plans for a lifetime savings account were laid out in the last Tory manifesto in 2005 and proposals may include the promotion of workplace Isas.

Waterson said: “We are looking at all sorts of flexibilities. I think we might get away from the notion of pensions and look at lifetime savings.

“We have not got a developed policy yet. All I can say is that we are certainly looking at the KiwiSaver model quite closely.”

Under New Zealand’s KiwiSaver scheme, members can access their pension savings if they are moving overseas, to buy a first home, fund healthcare if they become seriously ill or deal with financial hardship.

Cicero Consulting director Iain Anderson says: “The Conservatives are certainly angered by the Government’s recent moves on personal accounts and are looking at plan B actively now.

“This includes promoting the Isa as the main vehicle for lower-income-earners as part of likely lifetime savings proposals.”

What are your views? Would a scheme more like the KiwiSaver encourage more people to save? Or should we crack on with personal accounts now a significant amount of taxpayers’ money has been thrown into it?

To comment click on the link below.


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. KiwiSaver for UK?
    Great idea!

  2. Conservative Lifetime Flexible saver
    The problem with making an account accessible, is that it will be used many times. This will make it difficult to build up a decent size pot for retirement. The current system of locking the money away until retirement age is a discipline which is needed. The Government should not be imposing personal accounts on employers and employees. Employees that cannot afford to make contributions will opt out.

  3. From Debt Driven to Savings Driven
    This is what George Osborne said he was going to strive to achieve turning the UK economy on it’s head. Last nights interview on Newsnight. Turn the UK economy from a debt driven one to a savings driven one.

    If he means it then this type of scheme is a perhaps one of the ways forward. It ties in with the long term one off care payment policy announced earlier in the week.

    At last a more modern flexible approach to life long savings maybe on the horizon. All he has to do is de-construct the many and high barriers to save for the long term that have been errected over the last 15 years or so.

  4. kiwi accounts
    Are the tories changing to the new isa kiwi account to save on the tax relief?
    I think they should leave the pensions alone as all that would happen is that each new government would change the goalposts and make the previous scheme worthless.

  5. kiwi accounts
    A more flexible approach to long term savings is required which should include the scrapping of the necessity to buy an annuity.

    The difficulty comes in ensuring people do not access the money for minor puchases and ensuring it is used for their retirement.

    The other priority must be simplicity, people will only save if they have a basic concept of how the money is invested and they can see the benfits.

  6. Putting the customer first
    Delays to Personal Accounts further undermine any customer expectations around sensible outcomes from this initiative. Pensions will continue to be viewed with suspicion. ISAs are generally well regarded. Challenges will be moving lifetime savings forward at any speed quicker than Personal Accounts and also in the detail (and avoiding the complexities of the current system). Another worry has to be planning blight i.e. people do nothing while they wait for something better to come along.

  7. Ideas
    I am broadly in favour. Acheiving a balance between accesability and tax efficiency is needed. Perhaps something which locks in payroll deducted contributions for 3-5 years at a time at which point it can be moved to a pension without tax or half can be taken subject to tax as income so that it discourages lareg withdrawels as they could be taxed at 40% but encourages one to move across to a pension. Just allow tax free growth and then treat it all as income when it comes out and that would encourage saving and drawing down over time rather than cutting and running. Hasn’t the Government and FSA ever heard of brainstorming as I’m sure we could all come up with some great ideas if we all sat down in one room (I can always come up with a wacky idea which may well be shot down, but sometimes we need something a bit different)

  8. This is not advice BUT
    To anon at 17.03 – ASP is not compulsory annuitisation and it’s worth a look at Lincoln’s iLive Flex annuity post 75 for anyone who is still adamant they don’t want a traditional annuity, but the risk of ASP without a guarantee is felt too high by the adviser or client.
    To balance my suggestion to look at Lincoln, you could also look at Metlife or Scot Eq’s Income 4 Life too.

  9. Mr Waterson’s Comments
    Accessibility and tax relief-doesn’t the United States’s main pension plan (the 401K?) achieve this by making loans available for virtually any purpose from the fund but repayable at a commercial rate? Surely an attractive proposition fo a pension scheme. We recommend ISAs as an additional or complimentary method of building retirement funds but is anyone else, in terms of this entire exercise, reminded of 1974? As an eager young(-ish)well scrubbed Inspector I hurried from broker to broker with our pension proposition given a massive boost by the then Conservative government’s enthusiasm-a few months later the new Labour government’s Barbara Castle scrapped the whole thing. What is the expression, history repeats itself the first time as tragedy the second as farce?

  10. KiwiSaver
    It is worth noting that KiwiSaver is not a pension scheme in the tradiotional sense. You build up a lump sum, and you can access it from the age of 65 to draw down from at will. I feel that the notion of a pension plan buying an annuity that is embedded in the scheme is one complexity too far.

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