View more on these topics

Steve Webb: Govt should use trivial commutation to promote savings

Pensions minister Steve Webb says the Government should use trivial commutation as the “selling point” of automatic enrolment to promote savings.

Current trivial commutation rules allow people aged over 60 who have total defined benefit and defined contribution savings of less than £18,000 to take their entire pension fund as cash.

Speaking at a Strategic Society Centre event in London last week, Webb said trivial commutation rules could be used to boost take-up among the over-55s.

He said: “In the early days of auto-enrolment we know there will be lots of people enrolled for a few years and ending up with a few thousand pounds.

“We need to communicate the fact that is still worth doing because if they can find anyone to give them an annuity for it they won’t be very impressed. 

“Actually, the way they feel about a £2,000 pension is very different from a £2,000 lump sum.”

Webb said older people were more likely to opt out of auto-enrolment because they underestimated the cost of retirement as well as how long they wouldwork and live.

He added: “How do we communicate to those older workers that even relatively modest pension savings are worth having because you get employer contributions, you will work longer than you think and you don’t save as much as you think, particularly in a DC world?”

FortyTwo Wealth Management partner Alan Dick says: “People are not saving because they are fed up with politicians tinkering with pensions rules. It is not because they want a lump sum at the end.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    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

    Email: customerservices@moneymarketing.com