View more on these topics

Should we reform the reforms?

The Centre for Policy Studies is calling on the Government to boost the state pension 10 years after retirement and encourage retirees to spend the majority of their savings on their first 10 years of retirement.

In a report published this week, the CPS proposes replacing personal accounts with a new defined-contribution, state-sponsored scheme – the flexible retirement savings account – that supposedly eliminates the risk of misselling.

It suggests the state pension should be substantially increased 10 years after retirement age, allowing retirees to concentrate their FRSA-derived income on the first 10 years of retirement – when they are more active.

The FRSA would have contributions totalling 7 per cent of gross earnings – 3 per cent from the employee, 1 per cent tax relief and 3 per cent from the employer. The report says tax relief should be 33 per cent irrespective of a person’s marginal rate.

Those on low incomes would have their contributions topped up by the state under the proposals. The report also suggests allowing savers to bequeath pension assets free of inheritance tax, provided the assets go into a retirement savings scheme.

State second pension cashflows would be re-engineered to help finance the larger state pension and FRSA top-ups.

The CPS says more people would be contributing the full rate of national insurance contributions as contracting-out rebates will have stopped and larger retirement incomes will prompt means-tested benefit payments to fall.

Living Time managing director Dave Harris says: “This report makes some radical and innovative suggestions aimed at building sustainability to Britain’s in-retirement landscape which we hope policymakers in the UK will consider very carefully.

“The proposal to develop flexible retirement savings accounts, which provide greater flexibility, to replace personal accounts demands attention by all those involved in shaping the future retirement planning for the UK.”

What are your views? Are these workable solutions? Should the Government, or perhaps the Conservatives, take heed? Are the current plans for pensions reform adequate? Click on the link below to comment.


News and expert analysis straight to your inbox

Sign up


There are 5 comments at the moment, we would love to hear your opinion too.

  1. Should we reform the reforms?
    No, this will just further complicate an already dreadfully overcomplicated system of state benefits in which an ever increasing proportion of the population have an ever decreasing level of confidence. A money purchase State Retirement savings scheme sounds to me like something of which most people would wisely steer a mile clear. I wouldn’t go near it. People need to be encouraged to save into a Personal Pension plan by overhauling the entire framework from top to bottom and by undoing as much as possible of the damage done by stakeholder and by Pension Simplification. Top of the agenda should be removal of the annuity trap (replace it with a Pension Income Bond) and the lack of inheritability of unspent funds. The people dreaming up these crazy new ideas simply can’t see the wood for the trees. Shoot the lot of them.

  2. Should we reform the reforms?
    I think the point that is being missed by all these so called experts is that its is not the vessel to get to retirement thats a problem, neither so much the options at retirement but a) lack of understanding and b) lack of compulsory contribution. A stakeholder or personal pension plan are fine vehicles for saving for retirement but given a £1 or £1 tomorrow people are living for today

  3. Roddy Kohn managing Partner KohnCougar 24th September 2009 at 4:52 pm

    should we reform the reforms
    Is it me? Is anyone else amazed at the relentless capacity of the financial great and good to continue to mess and meddle with pensions? The thought of “reforming the reforms” begs the many questions .On the surface of it these reforms may be noble. They may even been be necessary & justify yet more millions of tax payers money being squandered. Im forced to ask myself where Money marketing finds these people & organisations. …Not on earth that’s for sure. After all a 172 Billion pound deficit ,coupled with the lowest level of consumer confidence in politicians and the financial services community in history might offer some insight as to why the great British public want no more meddling in their financial futures. These reforms are nonsense. Proposed by organisations that have long lost touch with what matters to Britain’s ordinary savers. Who’s self serving rhetoric falls upon deaf ears for the majority of consumers who realise making their own provision for retirement is the new game in town. For the CPS to propose “replacing personal accounts with a new defined-contribution, state-sponsored scheme – the flexible retirement savings account – that supposedly eliminates the risk of misselling” should remind us all that they have never been within a mile of a quality financial adviser (tied or Independent!) and that misselling is a misnomer, misguided and a gross exaggeration of an issue long past since hard disclosure, single premium priced pension contracts. Are these workable solutions? No Should the Government, or perhaps the Conservatives, take heed? No & finally are the current plans for pensions reform adequate? No but since when did that stop quangos, politicians and bureaucrats from telling the rest of us whets good for us?

  4. Arithmetically Incompetent
    Any proposal which suggests that 4% gross: 3% from employee plud 1 % tax relief is equal to 33% tax relief is worthy only of the wastepaper basket. Not worth reading further as it is clearly totally incompetent

  5. More pension reform needed?
    YES! It’s badly needed. Let’s ignore Roddy Kohn’s garbled nonsense and think seriously about the real problem. It is not about the level of saving; it is about the share of the economic cake and how to effect better distribution of that in a way that EVERYBODY has a stake in it. The word ‘stakeholder’ has been much abused, and I hate it, but in it’s true sense an ‘economic stakeholder’ should be the principal applied to all in a modern, fair capitalist economy. After all, everyone is an economic contributor if only buying a can of baked beans.Our present economic model is badly unbalanced.

    The accelerating transfer of wealth from the poor to the rich cannot go on; we must find a better way of inclusiveness for the less capable participants. New Labour has totally failed on its committments in this area.

    Every proposal by every quango, government body or think tank has been merely tinkering at the edges of this problem. It is clear we need a quantum change in the way the economy functions and is taxed; no proposal has come near suggesting something radical that will begin to address the issues for the usual reasons – political feebleness and self-interest. But after the shock the world has recently experienced, now is a once in a lifetime opportunity to do something positive. But who has the balls to do something about it?

    In my view these are some of the main issues and solutions:

    – call it what you like but we need a managed ‘national personal wealth account’ which is a lifetime accumulation vehicle for each individual that will include a mandated facility to generate retirement income and be transferable through inheritance. Align it with all state ‘benefits’ schemes and leave it open to taxation but at levels that favour/encourage the less well off. This account could be a controlled source of finance for house purchase or similar.
    – scrap the current pension regime altogether including annuities; it is expensive and merely a tax planning tool for the better off. Remove tax relief on contributions but give relief during contributional period like ISAs and offer tax free retirement income to certain limits (just think of the increase in Treasury receipts for the next few years).

    – reform/simplify all personal and corporate taxation.

    – reform ownership of land and capital, and tax both appropriately but put an emphasis particularly on spreading ownership in enterprise.

    We are were we are economically now and the pressing issues are reduction of all debt, personal corporate and national, and regeneration of employment. The statistics tell us that personal and corporate debt is being tackled – the scandal of national debt must be attacked now and those who have largely benefited from the recent rise in affluence should contribute most to putting matters right. Steps must be taken to ensure this does not happen again and the nation as a whole benefits in future.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm