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Pensions – new views

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The Pickering report on simplifying pensions is available, and will be prompting much discussion of how to halt the collapse in saving for retirement which has been so much in the news of late.

The government has announced that it will be producing a Green Paper on pensions in the autumn.

For good measure, the Treasury has also released the Sandler review of medium and longterm retail savings in the UK.

The Work Foundation has chipped in in response to Pickering. They state that the Government must not accept the Pickering Report’s proposal that employers should once again be allowed to force their staff to belong to the
employer’s pension scheme. The Work Foundation also criticises the report’s recommendation that schemes
should no longer have to provide survivors’ benefits. It describes the proposal as misguided and out of touch with reality, and says it strengthens the argument against compulsion.

Will Hutton, Chief Executive of The Work Foundation, said: “Should we compel people to contribute to schemes where they can lose all their money, because solvency standards are low and there are no guarantees? As pointed out very recently by pensions watchdog OPAS, if an employer goes bankrupt, those already drawing their pension from a final-salary scheme are usually safe enough, but those still working – though they may have been paying in for 40 years – can lose all or most of what they have built up.
Saving for retirement is necessary and important but today’s circumstances are very different from pre-1988 when an employer could last impose compulsory scheme membership.

“Many people now start their working lives loaded with student debt. Should they be ordered to put money away in savings? Should you force people who will never be able to build up enough to get above the basic level of the
Government’s new Pension Credit, to save for a pension when they are struggling to survive? Why should the Government compel people to spend their money on something for which they may receive no, or little, return – especially if these are people with urgent needs for the present?

“Savers should always exercise the utmost caution, especially in the current investment environment – caveat emptor. Compulsion to join employers’ schemes would mean employees surrendering any choice for what happens to the
money they put in. Contributions to an occupational pension may take up all the money that an employee is capable of saving. In the present climate it is vital to save but it is not sensible to have all your eggs in one
basket.”

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