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Two-thirds of IFAs see compulsion on the way

Nearly three-quarters of IFAs feel the Government could be forced to introduce some form of compulsion to pensions, according to research carried out at Royal & Sun Alliance pensions roadshows.

One hundred IFAs were questioned at events in London last month, revealing that 73 per cent of advisers expect the Government will have to go down the compulsion route to ensure individuals save for their retirement.

But R&SA says it believes there are more effective ways to raise the savings level in the UK by making long-term savings more attractive.

It gives the US example of 401k pensions where maximum tax relief is only offered to senior managers at an employer if a significant percentage of lower-paid employees join the firms pension scheme. In addition, members have access to 50 per cent of their pension funds in the form of a loan.

It says this is a huge incentive for those who abstain from a pension in case they should need the cash for more pressing things in the future.

The life office also says changes brought about by stakeholder are beginning to be understood and the apathy that existed during the lead-up is slowly beginning to disappear.

The survey also indicated the launch of stakeholder has forced employers to review their current employee benefits package, with 80 per cent of IFAs noticing an increase in enquiries since April.

Corporate promotions leader Andy Milburn, says: “Making long-term investment attractive rather than compulsory will go a long way to solving the pensions problem. In the US, the phenomenal take-up of 401K pension plans is largely due to the incentives the schemes offer.

“Providers should promote the importance of aiming to live comfortably in retirement by presenting schemes as a tax-deferred savings plan and not a pension.”

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