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MM leader: Start with reform to state pension

You wait ages for pension reform and then three arrive at once. Following the FSA’s December proposals to ban commission and factoring for group personal pensions comes the ABI’s seven-point plan to improve DC pension provision. And this week saw the Government announce plans to review the default retirement age.

The ABI’s proposals include a number of practical suggestions to increase income in retirement for members of DC schemes. The suggested age increase for forced annuity purchase or conversion to Asp grabbed the headlines but the whole package of proposals would have real benefit for money-purchase scheme members.

The Government’s latest pension reform is thankfully a welcome change – a fast-track review of the default retirement age that employers can currently to use to enforce retirement.

A retirement age of 65 is still a welcome target for many people but demographics and insufficient savings mean many people are being forced to retire before they want to or can afford to.

Retirement planning will have to become more flexible but this reform will give people the choice of when they want to retire rather than have it forced on them.

However, while the proposals detailed are welcome, the problems with retirement saving still remain. Without wide-ranging reform of the overly complicated state system, which offer strong disincentives to save for many lower-earners, pension saving will remain impenetrable and undesirable.

Empty Nest?
The Personal Accounts Delivery Authority has unveiled the new name for personal accounts – National Employment Savings Trust or Nest.

The rebranding has been met with a warm response from much of the industry and consumer groups and the new name is an improvement on the bland old version.

But IFAs seem to be a more cynical bunch than providers and more inventive to boot. The potential for puns and plays on words was not missed with many comments on scrambled eggs, eggs in one basket and cuckoo in the nest all suggested by our readers.

But behind the jokes is the concern that despite the new name, the pension system has some serious flaws, not least low contribution rates and meanstesting. If the flaws in the scheme are understood and people do not choose to remain in the scheme, the new organisation will be left looking after a lot of empty nests.

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