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Independent view

Health and pensions are very much in the news, reminding me of a discussion I had with a friend of mine not so long ago whose company had been involved with the purchase of a US manufacturing company.

His first impression upon visiting the new acquisition was that there was a surprisingly high number of workers beavering away well into their mid-70s. The reason for this was apparent when he enquired why they would not rather be enjoying their retirement – the greatest impediment to any retirement plans was the cost of health insurance which, even at a basic level, they could not afford individually. As employees, they were provided with cover through corporate membership and so had no option but to continue to work.

The debate over here regarding the future of the health service is set to run and run. The likelihood is that we will not adopt a US-style policy but it serves to remind us that adequate pension provision is extremely important.

The news on the pension credit for those on lower incomes is more encouraging, albeit that the full benefits are not going to be seen until 2003, which will be a big disappointment to those in need.

IFAs have, through regulatory pressures, been priced out of being able to provide advice to this sector of the market and I understand that Citizens&#39 Advice Bureaux are so swamped with requests for help that they can only handle a fraction of any queries, many of which are of a financial nature.

However, we do need to be aware of the impact of pension credits and there will be some tortuous decisions to be made by some investors, perhaps the parents of existing clients, who will need to decide how best to deal with their financial assets.

What I think is of even greater concern are those situations we run into where we are asked to advise younger generations as to how best they can make future plans. There are already concerns about the take-up of stakeholder.

We now have a categorical statement from the Government through the Department for Work and Pensions stating that “for people on low incomes, funded pensions are generally poor value and they would be better off in state provision” (DWP pension credit proposals, page three). The same document states that people on moderate and higher incomes are generally better off saving in a funded pension. Of course, what is not said is where the cut-off point is.

The document also fails to mention the fact that individuals planning 30 or 40 years hence must consider how their future career will develop and take account of the many changes of Government that will take place throughout their working life.

There is also the North-South divide to be considered. If one perhaps excludes the South-east, there are very many areas of the country where people manage on very modest income levels throughout their entire career, who never have the ability to build up more than perhaps a very modest nest egg.

A lot of very careful number-crunching will be necessary for those individuals who may end up near the margin, where there is a positive disincentive to make any form of savings provision.

Rather than prevaricate, the Government should come clean and spell out just where it sees the cut-off thresholds. In the ambulance-chasing society in which we now live, there will always be a lawyer willing to take up a case of supposed negligence where a different course of action many years ago might have produced a situation where making a sacrifice to build up a nest egg was deemed to be incorrect advice.

It is a sad state of affairs when bureaucracy becomes more of an issue in providing a framework for advice, when as each year goes by it is evident that individuals must take much greater responsibility for their own financial future.

Nicholas Conyers is a director of Pearson Jones


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Guide cover

Guide: how to… communicate with your pension members

Effective communication of your pension scheme is a large part of getting auto-enrolment right. Delivering the same message to all employees is not necessarily the way to go. To assist you with the communication of your pension scheme, we have provided some key areas to think about, such as:

  • What to consider when segmenting your workforce
  • How to communicate to pension scheme members at the right time in their member lifecycle
  • What topics you should be discussing with your pension members
  • The new pension freedoms and the importance of communicating them


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