Pensions: Start Here
Durman, Paul, The Independent (London, England)
Britain's pension revolution has stalled. At a time when the idea of private pension provision commands more support among Britain's politicians than ever before, sales of personal pensions to individuals are plummeting.
The arguments for private pensions are well understood. The healthier, wealthier populations of the developed world are living longer in retirement, imposing an increasing pensions burden on the taxpaying workforce. If Western governments are to avoid spiralling taxation, they must attempt a two-pronged assault on the problem - cutting state social security benefits and encouraging people to save more towards their own retirement.
This logic, once resisted by Labour, is increasingly accepted by Tony Blair and his team.
Pension experts fear the message has still to get across to the man in the street. Changes already made to the state earnings-related pension scheme (Serps) will significantly reduce its value for those retiring in the next century. The increase in the female retirement age from 60 to 65 also threatens to impose an additional burden on many families.
Pension companies believe the Government has failed to make it clear how these and other changes will cut back the support available from the welfare state. Tony Reardon, pensions development director at the insurance company Allied Dunbar, says: "The Government has got to be honest with the public and say, 'We are reducing state pensions'. I would like to see the Government doing a lot more advertising on pensions."
With a large and growing need for private pension provision, Britain's pensions industry should be enjoying a bonanza. But the opposite is true. This year's sales of regular-premium pensions policies (where you save monthly) look set to reach little more than half the number sold in 1991.
This paradox is explained by the two huge scandals that hit the pensions industry in recent years. Personal pensions, first introduced in 1989, appeared to have been a great success story for the life insurance industry, with more than five million policies sold.
But two years ago, it became clear that hundreds of thousands of investors had been badly advised either to leave good company pension schemes, or to transfer previously accumulated retirement savings into a personal pension. The cost of putting right the resulting financial damage has been estimated at anything up to pounds 4bn. Public confidence in the life insurance industry, never strong, was dealt another heavy blow. Financial watchdogs pushed through a wide-ranging series of reforms to prevent a repetition.
Many financial advisers seem to have concluded that selling personal pensions is more trouble than it is worth. On top of the usual checks they have to make when selling financial product to a client, personal pensions involve another layer of complexity. …