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Search for the pension hero inside yourself

Curly Watts was a pension hero of 2000. Fans of Coronation Street will have seen pensions taking centre stage at Curly&#39s stag party in an episode just before Christmas.

Over their pints in the Rovers Return, the conversation turned to financial planning for the long term. The general conclusions seemed to be that joining an employer scheme was good and that, one way or another, you needed to save about 20 per cent of pay to maintain a good standard of living in retirement.

This may seem irrelevant to real-life pension challenges but Coronation Street is watched every week by roughly 10 million people including many of those who the Government is trying to reach with the stakeholder initiative.

In my book, Curly is definitely a pension hero of 2000. But who then might be the pension heroes and villains of 2001? Faced with the changes resulting from the stakeholder initiative, the answer is all of us.

Employers can be heroes if they react constructively, not only making sure they extend some sort of pension offering to all employees covered by the new law but also being prepared to make a significant employer contribution and pay for decent life and sickness cover.

But employers can be villains if they turn a blind eye to the new requirements and wait for the Occupational Pensions Regulatory Authority to catch up with them before they do anything.

Employers will also be villains if they use loopholes to comply with the letter rather than the spirit of the law. It may be legal to avoid offering any pension at all by covering everyone with an occupational pension scheme whose only benefit is a tiny lump-sum death benefit but this is certainly not in the spirit of the law.

The likely outcome in this example, once the employees realise what is going on, is that the employer&#39s reputation will suffer not only in the eyes of the workforce but in the outside world as well. This will be bad for business and, if many employers take this route, the loophole is likely to be removed so that the employer will have to do the job properly.

Pension providers can be heroes if they make competitive pension and related products available as widely as their corporate structure will permit. But providers will be villains if they restrict their stakeholder schemes to cherrypick business or if their product offerings underplay the role of life and health cover and the importance of individual advice.

Financial advisers can be heroes if they plan their 2001 work schedule to cope efficiently with the two key dates – April 6 for the start of stakeholder, the new transfer regulations and the new moneypurchase tax regime and October 8 for compliance with the stakeholder legislation.

On the other hand, advisers will be villains if they miss out on the huge pension opportunities because by doing so they will cause many ordinary people to miss out as well.

Finally, and most importantly, the Government can be either a hero or villain. If it ensures that those who can make pension provision get the right encouragement to do so and looks after those who cannot, then it will be a hero.

This approach will include responsible generic advertising and giving financial encouragement to do the right thing. Two key examples of this are the tax treatment of funded private pensions and the terms for contracting out from April 2002.

But the Government will be a villain if it regards pension funds as a herd of fiscal cash cows or if it pretends that the only thing which counts for private pension is the size of the administration charge.

I hope we will see more pension heroes than villains in 2001 and look forward to Opra paying a visit to Mike Baldwin – Coronation Street&#39s very own sweatshop employer – in the October 8 episode.

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