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Godfrey may have found solution to pension dilemma

So, the pension debate rumbles on over how to reach out to the great

unpensioned. Most of those in the know advocate some form of compulsory

contribution as the only way to achieve this goal.

Meanwhile, the Government&#39s answer- stakeholder – appears to be foundering

before our very eyes, with at least two companies, Clerical Medical,

although temporarily, and Scottish Amicable already effectively giving up

the ghost two months before the compulsion deadline for firms with five or

more employees.

To the Government, compulsion represents one of its biggest dilemmas. Just

how do you get re-elected in five years after imposing a new tax on the

majority of your voters? Because that is exactly what compulsory

contributions would be – a tax on the poor, those without access to a good

occupational scheme. However, there could be an answer and it comes from an

unlikely source – AITC director general Daniel Godfrey.

He is proposing that the Government raises money today by increasing the

national debt. The capital raised could then be used to fund a stakeholder

for every one of today&#39s workers while we continue to fund today&#39s

pensioners through current taxation.

The benefits of the scheme would be an eventual reduction in the burden on

the state, which could be used to repay the debt, while the debt itself

could provide the answer to the shortage of long-dated gilts, solving the

annuity funding crisis.

What better way for the Government to ensure stakeholder is a success by

giving everyone a free plan? It all sounds far too simple and easy to be

taken seriously.

Recommended –

Friday, 31 August 2001.Type: ASU mortgage protection plan.Maximum benefit: £1,500 or 65 per cent of gross monthly income.Benefit payment period: 30 or 60 days.Premium: £2.75 per £100 of unemployment or disability cover, £4.25 per £100 of combined unemployment and disability cover for 30 day payment period, £2.25 per £100 of unemployment or disability cover, £3.75 […]

Rough on the smoothing

I refer to the letter from Terrence O&#39Halloran, Who can beat the returnson with-profits? (Money Marketing, August 16). One of the problems with with-profits is determining what the returns havebeen. Surveys of maturity values on with-profits funds are often quoted butthese only cover a tiny fraction of the policies on the books and by nomeans […]

Standard bearer

There are over 4,000 mortgages available in the UK. If this choice is notbewildering enough for the borrower, these mortgages come in a variety ofshapes and sizes – special rates for different periods as well as differentconditions and offers. There are also different methods of calculating mortgage interest,including tracker rates based on the Bank of […]

Threat to R&SA life arm sale as GAR liabilities top £1bn

Royal & Sun Alliance&#39s guaranteed annuity liabilities have rocketed tomore than £1.5bn, putting it in the same league as Equitable Life andjeopardising a potential sale of its life business. Money Marketing can rev-eal that its 2000 Treasury returns show reservesfor guaranteed annuity options rose on the back of R&SA&#39s Sun Alliance &London £10bn fund. Its […]


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