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Real simplification is needed for pensions

April 5 is the day the Government believe they will have simplified pensions. We all know that that is not going to happen. The tax environment after A-Day is likely to prove complex and, as many pension industry experts are already saying, it is likely solely to be a good way of allowing those who already have good pensions to save more.

I feel sure that the chaotic way the bill was introduced means that it will create a great many unforeseen problems for the future. I also feel sure that saving for retirement will not be greatly affected by these changes and the vast majority of people will not feel that pensions have been simplified at all.

Simplification, to be meaningful for the 12 million people not saving enough for their retirement, is not just about tackling tax regimes. The state system must be reformed if people are to develop a clear understanding of what they might get in retirement and a clear incentive to save.

People need the state pension to provide a solid foundation on which to depend and on which to save. The Liberal Demo-crats would introduce a citizen’s pension (CP), based on a residency rather than National Insurance contributions and set at the level of the guarantee credit (109.45 per week for a single pensioners), and paid initially to people over 75. The state pension would then become a solid foundation on which to build private savings, and savers and professionals alike would be crystal-clear about their entitlements.

The CP will carry a simple message – it is worth saving. Today, half of all pensioners fall within the scope of the pension credit, which means-tests modest savings away.

The CP would lift a million people clear of means-testing – a crucial message that will encourage private saving. This would also ease a headache for pension sellers, removing the danger of misselling.

On top of a solid foundation for saving, we must counter the suspicion that private pensions are impenetrable andunsafe. To restore trust, we need a new way to save. We will introduce a National Savings pension which will combine a secure and trusted brand with a simple, inexpensive savings product, offering the ideal building blocks for savers and their advisers to plan a pension.

Individuals must have knowledge to enable them to make informed choices, which will in turn lift anxiety from the shoulders of many pension providers.

We would give everyone an annual statement setting out all their pension accruals and the weekly retirement income they could expect. On retirement, statements would show someone how much they had left, how much they had annuitised and their projected future income. In schools, citizenship lessons should cover financial management and saving.

To encourage people to save, we must also restore trust in occupational pensions. We would introduce a new, regularly updated kitemark system to apply a star rating to schemes, enabling employees and job applicants to make more informed decisions.

Because pensions are increasingly becoming a political football we would establish an Independent Pensions Authority to remove many pension policy decisions from party pol-itics. It would involve the main political parties, representatives of employers and employees, pension professionals and experts.

This pension package would provide genuine simplification as well as long-term stability for pension professionals and savers. It will create a stable, secure environment in which people will have confidence and incentives to plan effectively for their retirement.


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