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Report is no panacea to Govt&#39s stakes and pains

The impact of the recent Institute for Public Policy Research paper criticising Government pension policy has been considerable.

That a traditionally left-leaning thinktank, at one time seen as the Government&#39s favourite thinktank, should publish such a harsh criticism of the Government&#39s efforts to reform the pension arena has won a great deal of applause.

Many of the comments made in the interim report, Incremental and Fundamental Options for Second Term Thinking in Pensions and Long-term Care, echo concerns the industry has expressed for the last year and a half. But coming from such an influential body as the IPPR, there is a chance they could be taken seriously.

Virtually every contentious issue surrounding pensions is discussed in the paper, from stakeholder and long-term care funding to the basic state pension and pension credit. But while its frankness is applauded by some in the industry and political circles, others question the evidence which supports its conclusions.

Scottish Equitable pensions development director Stewart Ritchie says: “In general, I agree with the thrust of what the report is saying. There are clearly issues with the Government&#39s pension policy. Things are not working out nearly as smoothly as it had been hoped for a year ago.

“The implication of the report is that the policy in this area is not settled. It helps that an organisation like the IPPR has come to same conclusions as the industry.”

Scottish Life head of communications Alasdair Buchanan believes the report echoes industry concerns. He says: “A lot of people within Government who should have known better appear to have discounted comments made by the industry as representing vested interests.

“If the IPPR report has the desired effect we have been trying to achieve, then it must be a good thing except it is a shame they did not listen to the industry before all this was implemented.”

Whether stakeholder pensions are reaching their target group is one of the questions raised by the thinktank. Its report says: “Whether stakeholders reach their intended target group needs to be closely monitored. Those features of the stakeholder regime that allow such anomalies as wealthy grandparents to take out pensions on behalf of their grandchildren should be reviewed.”

But some suggest the IPPR has been too presumptuous in drawing its conclusions about stakeholder. They say it is far too early to say whether stakeholder has been unsuccessful in reaching its target market and taking such a view damages the overall credibility of the report.

Legal & General is one of these critics. Business communications manager Mike Smith says while it is important to pay heed to an organisation such as the IPPR, it has been too hasty in its remarks.

“When the IPPR makes comments, it should be taken seriously. But we think it is just not possible to say stakeholder is unravelling because it has only been going for four months,” he says.

An ABI spokesman points out there is no data to show how many pensions have been sold since April or who is buying them.

The IPPR report goes on to address the availability of pension advice to the public. It comments: “While the group being targeted might well need advice, it is unlikely to be available as a result of the 1 per cent cap on charges. Whether decision trees, the FSA&#39s answer to a no-advice world, will be a viable substitute is questionable.”

IPPR head of social policy Sue Regan, who was one of the researchers on the project, says the complex nature of pensions means there are doubts over whether decision trees will be successful. “The nature of personal advice is quite important. It seems unlikely that decision trees can fill the advice role,” she says.

The decision by the Government to fund nursing care and not personal care in the long-term care funding debate is also criticised in the report. The suggestion is made that, due to the Scottish Executive&#39s decision to fund both types of care, there could be an exodus of English pensioners across the border to take advantage of more generous state provision in Scotland.

However, Norwich Union long-term care strategy manager Sandy Johnstone finds this unlikely. He says the fact that some form of funding will exist in England and Wales from October means that, if there is any movement of people in the short term, it could actually be the reverse.

He says: “Until the Scottish decision has been clearly defined, it is very difficult to differentiate what is on offer in Scotland from what is on offer in England.”

But the Opposition parties have wasted no time in seizing on the report&#39s findings. Both the Conservative and Liberal Democrat parties have released statements saying the IPPR report proves what they have always said – that the Government pension policy is on course for disaster.

LibDem spokesman Steve Webb says: “The report provides further evidence of the Government&#39s failure to address the problem of pensioner poverty. The stakeholder pension scheme is clearly failing. The Government must act sooner rather than later to introduce a degree of compulsion into the provision of second pensions, otherwise take-up will continue to remain worryingly low.”

Conservative pension spokeswoman Jacqui Lait says: “This report, from one of Labour&#39s favourite thinktanks, reveals the catalogue of pension reform failures over which this Government has presided. There are two big issues that need to be addressed on future pension provision – how to encourage more people to save and how to encourage people to save more. Labour&#39s pension initiatives fail on both counts.”

The IPPR has managed to stir up the political debate over pensions by levelling criticism at a Government over which it has been so influential in the last four years.

It is still unclear what the official reaction will be – if any – but the thinktank has come up with many of the arguments made by the industry and subsequently ignored by the Government over the last year.

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