THE idea of a stakeholder pension which includes compulsory contributions is still unpopular with voters, most of whom do not understand how pensions work, according to a new survey.
The findings are in stark contrast to the views of leading players in the pensions industry and of consumer groups, who are both urging the Government to back mandatory pensions in its pensions Green Paper. That was due to have been published next week, but has now been delayed until October as Ministers wrestle with the issue.
The survey for the Association of Unit Trusts and Investment Funds (Autif) found 39% of those questioned favoured compulsory contributions for all those with income above a certain level, but only 24% said all those earning any income should have to pay in to a pension, and only 21% said anyone not in an employers' scheme should pay.
Among the 25 to 34 age group, the ideal time to begin contributing to a pension, 29% of the sample said nobody should have to provide for their own retirement.
Among the 65-plus age group, there was more enthusiasm for compulsory contributions, with 32% saying all those with an income should pay and only 21% saying nobody should.
Anne McMeehan at Autif says mandatory saving commands ''very limited support'' at present. ''It is ironic that the greatest level of understanding is demonstrated by those who have already retired, who likely as not are all too aware of the consequences of not having planned sufficiently in advance.''
Autif: ''It may be that a combination of simple attractive products and education on the amount people need to save for a comfortable retirement is all that is politically possible.''
An unusual alliance of Prudential, Standard Life and Norwich Union is strongly urging the Government to bite the bullet of compulsion as the only way to make its stakeholder pension work.
Keith Bedell-Pearce, executive director at Prudential, says: ''Compulsion already exists in the form of National Insurance contributions. What we are considering is not a radical departure, but whether the extension of that principle would ensure that many more people who could make some provision were able to retire with an adequate pension.''
Philip Scott at Norwich Union says the Government is faced with a difficult dilemma but ''sadly, voluntary action has so far proved unable to reduce underprovision''. Standard Life's John Hylands says increased compulsory payments are ''essential''.
The big three argue that people who can afford to should be compelled to fund a minimum target pension, ''set at a sufficient level to raise them above subsistence'', and their blueprint recommends:
o Compulsion should stop when that level is reached.
o Contribution levels for the minimum should be set within defined parameters by a new Independent Pensions Board.
o New payments should be phased in gradually.
o The self-employed should be included in the compulsory net.
o Pension schemes should guarantee minimum standards of rights and benefits.
o Employed workers should have automatic access to good company schemes.
o Tax and national insurance credits and rebates should be payable to those unable to make a full contribution.
Philip Telford at the Consumers' Association says: ''Our view is that in the UK individuals are not making enough provision for their own retirement. Pre-emptive steps are needed in the form of a compulsory second-tier pension, to ensure that all consumers have an adequate retirement income.''
In the Government's consultation on individual savings accounts, or Isas, a range of financial companies argued these made no sense for low earners alongside voluntary stakeholder pensions aimed at the same group.
Industry has, however, been more ambivalent.
The CBI says universal pension provision should be encouraged but any new arrangements should be stable through time and command all-party support.
The TUC says it is important to consider what ''protection and help'' those without second-tier pensions might need.
The Autif survey found a low level of basic knowledge about pensions. Of the regular, carefully filtered sample of 1000 financial decision-makers, 61% were not aware that pensions were subject to tax on payment, including almost a third of those aged 55 to 64. And 28% thought that half their pension savings could be withdrawn on retirement as a lump sum.
Autif says: ''The research consistently reveals that across all its personal finance questions women are more likely to respond 'don't know' than men. Men get it right, but also get it wrong, far more often.''
McMeehan says: ''Following the recent call by the National Association of Pension Funds for a radical simplification in pensions reform, it is clear that even more fundamental steps will need to be taken by Government if consumers are to understand what being on a pension will mean to them.''
Meanwhile simpler, more attractive, more understandable pension products continue to emerge from all sides of the industry.
In the past month the BBC has announced a new group personal pension scheme for its self-employed contributors, which is described by one of the fund managers, Barclays Global Investor,s as ''an ideal template for the Government's proposed stakeholder pensions''. It offers a choice of three managers, a #1 monthly fee per member, and investment charges of between 0.95% and 1.25% a year.
Scottish Mutual has just launched a new range of group personal pension plans which it says has more flexibility and simplicity, in response to the impact stakeholder pensions will have.
Scottish Friendly highlights the same virtues in its new flexible personal pension which allows payments to be raised, lowered or interrupted. It has a bid-offer spread of 5%, an annual charge of 1% deducted daily from unit prices, and a policy fee of #2.50 a month or #25 a year.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article