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Rationalisation of provision is key to pensions

As a party, we are fundamentally more likely to allow the financially independent to make their own provision for retirement rather than the present Government which is telling people what to do with their own money.

We want to create a climate of change in people&#39s attitudes to retirement provision in the same way that opinions have changed over drink-driving and smoking.

But we prefer to approach the issue through persuasion and encouragement rather than through compulsion.

A Conservative Govern-ment would abolish the requirement to buy an annuity at 75, except to the extent required to achieve a total pension income above the level qualifying for social security benefits, in line with the recommendations of the Dr Oonagh McDonald Choices report.

While we accept there are benefits from stakeholder pensions, the people who the Government wants to benefit from it – people earning less than £20,000 – are the least likely to be able to afford stakeholder pensions and also the most likely to need advice which cannnot be given within the 1 per cent price cap.

The confusion for the consumer is increased by the fact that decision trees cleverly omit the minimum income guarantee from savings decisions.

But stakeholder is a useful product and the charging cap has had a beneficial effect. I believe even the industry would acknowledge that.

I want to see significant simplification of the whole of the pensions system. There is a huge amount of work to be done on how best to rationalise pension provision, but the benefits of a simplified regime are:

It makes it clear to the public that it is more attractive to save for retirement, and secondly It will remove cost from both the Government and financial services companies.

For the under-30s, we propose to offer an opt-out of the basic state pension, allowing the individual to divert payments into a pension with a recognised pension provider.

Individuals would be paying between £500 and £1,500 a year into the account but with no extra expense to themselves.

The Government would guarantee that if the fund did not produce an income equal to the state benefit at the time, it would top up the difference.

In the UK we have a regulatory system that regulates both the selling of products and the products themselves. Most other countries have one or the other. We would look at whether we need both belt and braces regulation for pension products.

Turning to the immediate changes to pension regulations, we propose to raise the tax threshold by £2,000, taking one million pensioners out of paying tax.

We will also do away with taxation on income from savings, which is a policy that will be of benefit to IFAs.

A Conservative Govern-ment would also set up a simplified independent pension account for the large number of self-employed people or those in small businesses below the threshold for providing a stakeholder scheme – or who are not working for any reason – for whom a stakeholder pension is not an attractive option.

For these groups a simplified IPA would represent an easy and attractive scheme to save what they can afford for their retirement – benefiting from tax rules for pension savings.

We would remove the requirement to invest an IPA through a pension scheme, running it on a parallel basis to an Isa or Pep.

The IPA would not be encumbered by the administrative costs and restrictions of membership of a pensions scheme, but would have the same eligibility and contribution rules as for stakeholder pension saving.

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