The Department of Work and Pensions is likely to make significant changes to the proposed pension credits in response to industry consultation.
The pension credits, announced in November last year, are planned to ensure it always pays to save into a pension even for low-earners who could expect to benefit from the minimum income guarantee.
But initial details of the planned benefit were criticised by pension experts as they effectively meant low-earners were paying a higher rate of tax on any savings. It was also feared that there would be too much complexity surrounding how credits could work with the Mig.
In an interview with Money Marketing this week, pensions minister Ian McCartney says: “The industry will be pleasantly surprised to see that the Government has been listening to people on how best pension credits will be established.”
McCartney and Social Security Secretary Alastair Darling are currently constructing the legislation which will bring in the pension credit in time for 2003.
McCartney also reveals that, in spite of ongoing speculation, pension compulsion is currently off the agenda. He says: “There are no plans for compulsion at the moment,nor are there any secret plans for compulsion.”
McCartney says he is looking to encourage an ongoing dialogue with IFAs: “I see them as professionals and I do respect difficulties they have which is why we need an open transparent relationship and in having that relationship where there are difficulties let us discuss them so I can do my job more effectively.”