Steve Webb, the pensions minister, is addressing pension executives today and will be challenging them to provide a money-back guarantee to everyone who will be saving for their pensions through a new workplace defined contributions plan. This kind of scheme would ensure that people get back, as a minimum, the value of the contributions they have paid in.
This is one of several proposals which will be consulted on later in the year. Other ideas include collective risk sharing, which allows pension companies to pool their accounts and share the investment risk.
You can read the full article in the Financial Times here.
* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.
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7 Comments
Excuse my ignorance but is this adjusted for inflation?
The state must take responsibility for looking after citizens to old to earn their keep themselves with an income that rewards them for the contribution they have made to society during their active years. Private pensions are alright as a top-up – icing on the cake – but it is wrong to expect the nation to rely on private pension providers for a basic living pension because
1) Pension providers like banks can go bankrupt and in-house employee schemes are open to embezzlement and misappropriation of funds
2)Works pensions can tie the employee to the company for a lifetime restricting him/her like a slave denied a career opportunity with another firm
3) The ups and downs of life can compel a n individual to abandon a pension policy and take a heavy loss with a “paid up” policy. Also policy holders have to sacrifice part of their contributions to salesman commissions and high portfolio management fees . In other words private pension providers are in the business for profit: the policyholder is their pawn
@ Mike C
I think your infomation is out of date. your point 1 was very true until the at old Labour MP Robert Maxwell exposed how susceptable they were.
These days there is a celar seperation fo company pension funds control and managment of businesses.
On point 2 that is only if a pension is sufficiently generous to make moving to an equivolent remunerated job difficult as the employee recieves such a generous arnagement where they are.
Point 3 would take more time to explain.
re Mike C’s post, the information is so out of date and plain wrong !
re point 1, there is the Policyholder Protection Scheme, the Financial Services Compensation Scheme and the Pensions Protection Fund to provide the necessary safety nets for insurer and company failures;
re point 2, this is just not true. A much bigger problem is employees foolishly declining to join pension schemes and then not benefiting from employer contributions which is essentially declining a pay increase ! ;
re point 3, charges and costs may be an issue and there is scope for improvement but no pension plan is worse than an over priced one particularly when so many don’t trust the State and think state pensions will be abolished by a future Government as unaffordable.
Nice to see people from the pensions industry on here defending themselves. If we could replace all the people working in the pensions industry who are paid to pick shares with monkeys, picking stocks at random and paid with bananas, we could reduce the current stupidly high overheads down to a sensible level and our pensions would be more valuable. That is the scandal of pensions. Experts sucking whacking percentages out of portfolios every year whether they are successful or not.
Money grows only if it is invested. All investmens have risks, and the value of your investment can go down as well as up. Even if you employ monkeys! So it seems that the only way to make a money-safe scheme is to top up from today’s contributors if the investment income goes down too much.
In reply to my critics,
Protection schemes are fine for the individual concerned but these schemes have to be funded and in a roundabout way it is the policyholders themselves who pay for their own compensation through a percentage of the premium creamed off to go into the compensation fund.In the event of fraud or bankruptcy everybody is a loser to a greater or lesser extent. Also there are ways of planning for retirement which do not come under the umbrella of these schemes,
Incidentally if the state pension is scrapped, what do we do about the disabled and minimum wage low paid who cannot afford to go into a pension scheme: do we offer them euthanasia at 65 ?
And I would dismiss the excuse “unaffordable” as justification for scrapping the state pension: if the mighty state has not got sufficient resources, who has. Or does unaffordable mean that governments facing re-election are scared of adding a few pennies to National Insurance or income tax?
I believe that we take a big risk in trusting the “City” and its institutions: the present scandals confirm this: I prefer to put my trust in the state flawed as it may be. If the “City” lets me down I am impotent, if the state betrays me then as a political activist in a democracy I have a chance of doing something to correct the situation